Moody's raises credit-loss expectations for new Ford floorplan issues
Ford Motor Credit’s next note offerings from its master trust of securitized dealer floorplan receivables securitization has higher loss expectations from Moody’s Investors Service, reflecting this week’s debt-rating downgrade to junk status for Ford Motor Co. and its captive finance lender by the ratings agency.
The Moody’s cumulative loss expectations for both the $986.8 million Series 2019-3 and $460.6 million Series 2019-4 notes from the Ford Credit Floorplan Master Owner Trust A is 20.5% for each – a 50 basis point increase from the Moody’s estimate for Ford’s most recent floorplan securitization deal in April (Series 2019-2) backed by receivables from franchise dealer payments for inventory financing provided by the lender.
Moody’s cited the higher loss projections due to this week’s unsecured corporate debt downgrade to Ba1 for both the automaker and Ford Motor Credit, from the previous investment-grade level Baa3 rating.
Both issues are collateralized from the same $19.3 billion pool of 3,065 franchise dealer accounts (including both Ford and AutoNation dealers). However, Ford plans a longer 53-month revolving period for the smaller 2019-4 deal, in which the trust may swap out collateral assets for other dealer accounts.
The revolving period for Series 2019-3 is limited to 29 months.
The capital stack for Series 2019-3 includes two classes of term Class A notes due September 2024 that together will total $750 million (the final tranche sizes will be determined at closing) and receives 24.3% credit enhancement. The Class A notes have preliminary Aaa ratings from Moody’s.
Moody’s also rated a $34.5 million Class B subordinate tranche at Aa1, but did not place ratings on the $49.3 million Class C and $29.6 million Class D note tranches, each of which will be retained by the trust for risk-retention purposes.
Series 2019-4 features a senior $350 million Class A notes tranche that also has an expected five-year maturity and provisional triple-A ratings from both Moody’s and S&P Global Ratings and is supported by similar 24.3% credit enhancement.
Three subordinate classes totaling $57.57 million include a $16.1 million Class B offering with an early Aa1 rating from Moody’s and AA+ from S&P; similar to the 2019-3 series, the unrated $23.02 million Class C notes and $13.8 million in Class D notes will be retained by the sponsor.
S&P issued a presale report Thursday on the 2019-4 Series, and expects 22.3% cumulative net losses on the smaller offering. S&P maintains an investment-grade BBB debt rating for Ford.
S&P did not rate Ford’s prior deal in April.