GM Financial plans to sell $592.47 million in notes backed by dealer financing receivables through its nearly three-year-old inventory floorplan trust.
GMF Floorplan Owner Revolving Trust 2016-1 is only the second-ever securitization of dealer financing receivables through the GFORT vehicle, more than a year after GFORT’s debut 2015-1 series in April 2015. The trust was formed in late 2013.
Barclays, Deutsche Bank, J.P. Morgan, and RBC Capital Markets are underwriting the deal.
Fitch Ratings has applied early ‘AAA’ structured finance ratings on the two tranches of Class A-1 and A-2 notes that will be split between floating-rate and fixed-rate tranches. The size of the tranches is to be determined, but both will be supported by credit enhancement of 27.86% of the collateral pool. The ‘AA’-rated Class B notes total $34.25 million with a 22.86% CE, while the Class C notes rated ‘A’ by Fitch will carry 18.36% CE. The class D notes totaling $27.4 million are to be retained by GORT.
The CE across the capital stack is lower from the CE levels of 2015-1, when the class A notes benefitted from 29.36% support.
The transaction includes a much lower overcollaterization level of 13.5%, well below that of peer transactions like Ally Financial’s Master Owner Trust (25.5%) and Ford Motor Co.’s Credit Floorplan Master Owner Trust (23.5%).
But GFORT carries three CE step-up triggers that would increase the OC or the reserve account in the pool should the dealers’ monthly payment rate (MPR) decline within the pool. The MPR is a calculated percentage of what dollar amount of outstanding receivables is paid down monthly. Fitch stated a lower MPR indicates slower-paying receivables due to either slow sales or high vehicle inventories.
According to Fitch, the MPR payment rate from dealers has been strong, with a peak 43.5% monthly rate, a low of 36.8% and an average of 39.7% in 2016. The churn of new vehicles is also strong, with 75% of the vehicles in the dealer inventory bucket less than 120 days, according to Moody’s.
The receivables are from credit lines originated by AmeriCredit Financial Services, d/b/a GM Financial, for retail GM-franchised dealers.
The dealer financing is ultimately backed by the vehicles in the pool, comprised of 85% new passenger, SUV and truck models, with nearly half (49.5%) from GM’s Chevrolet brand.