GM Financial, a frequent securitizer of auto loans, is planning its first securitization of lines of credit to auto dealers.
J.P. Morgan is the lead underwriter.
Automakers typically help dealerships finance their inventories of cars; dealers can tap a line of credit to purchase vehicles, repaying the line as the vehicles are sold. Banks also provide this type of financing and both banks and the finance arms of manufacturers securitize the lines of credit. The vehicles themselves serve as the ultimate collateral.
The $600 million GMF Floorplan Owner Revolving Trust (GFORT), Series 2015-1 will issue four classes of notes with a three-year expected maturity. The class A notes will be split into two classes, a fixed-rate class A-1 and a floating-rate class A-2. Both benefit from credit enhancement of 29.36% and are rated AAA’ by Fitch Ratings. The three subordinated tranches, the AA’ rated class B notes, the A’ rated class C notes, and the BBB’ rated class D notes, are all fixed rate.
The collateral securing the notes consists of a revolving pool of dealer floorplan receivables originated from credit lines originated by GM Financial under the AmeriCredit Financial Services brand to retail automotive dealers franchised by General Motors Co. as well as a small portion of other automakers.
The trust is comprised of 446 dealer accounts, with the top 25 dealers in the trust totaling significantly less than 50.0% of the trust balance, according to Fitch. Dealer concentration limits are in place, mitigating risks of individual dealer defaults and losses. Concentration limits are also in place to limit exposure to specific vehicle types and segments.
According to Fitch, the financial metrics of the dealers are comparable to other those backing flooplan securitizations of GM Financial’s peers, notably Ally Financial, which came to market this year. A key distinction of the GFORT portfolio is the fact that all the dealers are existing dealers with most having been in business for many years (and some for decades),” the presale report states. “These dealers are significantly experienced and have had solid relationships with their lenders and GM.”
While the collateral is comparable to recent deals by its peers, the initial credit enhancement for the class A notes, at 29.36%, is higher to the 26.50% in Ally’s most recent deal and the 24.38% in a recent deal completed by Ford Motor Credit.