Navistar Financial Corp., the retail and wholesale financing arm of struggling truck manufacturer Navistar International, is issuing its first 2016 dealer floorplan securitization.
Navistar Financial Dealer Note Master Owner Trust II Series 2016-1 is a $250 million notes transaction split into four classes of notes. It matches tranche-for-tranche and dollar-for-dollar the structure of its previous transaction in July 2015.
Moody’s Investors Service has assigned provisional ratings to the $250 million in notes backed by receivables from Navistar dealers’ inventory purchases of new and used vehicles.
The Navistar 2016-1 deal’s four notes are topped by the senior Class A notes sized at $211.33 million. The senior notes were assigned a provisional ‘Aaa’ structured finance rating by Moody’s, according to a presale report issued Friday.
The notes are scheduled to revolve for two years, with no principal payment to noteholders in that time. They will carry a floating rate coupon to be determined for the expected Oct. 5 closing.
The notes are supposed by 25% initial hard credit enhancement, including a 1.5% reserve account and an overcollateralization level of $26.24 million, or 9.5% of the total collateral pool of $276.24 million.
The Class B notes are rated ‘Aa3’; the Class C notes at ‘A2’ and the Class D notes at ‘Baa3.’
The notes will benefit from descending levels of credit enhancement, from 25% for the Class A notes to 11% for the subordinate Class D notes.
The inventory of the 2016-1 pool includes receivables for wholesale purchases of buses (31% of the pool’s assets), service trucks, heavy- and medium-duty trucks and trailers.
Moody’s has rated seven previous Navistar floorplan securitizations. This is the first transaction since Navistar made its lone 2015 deal in July, when it also issued a $250 million securitization divided by four note tranches that are the sized similar to its new deal.
Dealer inventory financing in Navistar’s trucking sector benefits from the dealers’ ability to have higher absorption rates due to revenue from ancillary servicing and parts sales. However, the trust is exposed to dealer concentration risk due to the low number of franchised Navistar dealers (240) compared to typical auto floorplan trusts.
The largest dealer has a limit of 9% of the aggregate dealer note balance, according to Moody’s.
The Navistar trust had an $856 million pool balance as of July 31 with its 240 dealer accounts. Dealers pay a note rate of prime plus a minimum 325 basis points.
Navistar International has seen its market share decline in recent years, but the company turned a profit in its last quarter (net income of $4 million). In August, Volkswagen purchased a $255 million minority stake in Navistar to for a strategic commercial vehicles alliance.
Lead underwriters include Bank of America Merrill Lynch and Credit Suisse.