Navistar Financial Corp., a wholly owned subsidiary of Navistar, Inc., is making its first trip the the securitizatino market since November 2014.
BofA Merrill Lynch and Credit Suisse are the lead managers of the deal, which is backed by dealer floorplan financing.
Navistar Financial Dealer Note Master Owner Trust II Series 2015-1 (NAVMT 2015-1) will issue four tranches of notes; the $211.3 million of class A notes have been assigned a preliminary AAA’ rating and benefit from 25% credit enhancement.
At the subordinate level, there is a $13.1 million tranche of class B notes rated AA,’ a $11.7 million trance of class C notes rated A,’ and a $13.8 million tranche of class D notes rated BBB. The class B, C, and D notes benefit from credit enhancement levels of 20.25%, 16%, and 11%, respectively.
The structure of the deal also includes 9.5% overcollateralization.
All classes of notes are expected to mature June 26, 2017; however, legal final maturity is set for June 25, 2020.
Wells Fargo Bank is acting as the backup servicer on the deal; Citibank is serving as the indenture trustee and Deutsche Bank Trust Company Delaware is the owner trustee.
The notes are collateralized by loans used to finance dealer inventories of new and used commercial trucks and vehicles.
Navistar is an Illinois-based manufacturer of commercial trucks, buses, defense vehicles, and engines. The structure of floorplan transactions calls for dealers to execute a separate note for each truck that is financed. Each note between Navistar and its dealers constitutes the dealer direct obligation to Navistar upon purchase.
In its presale report, DBRS notes that while the deal being marketed is structurally similar to auto ABS transactions, there are different risks and advantages to the underlying collateral of NAVMT 2015-1. The rating agency points out that the purchase of commercial trucks is economically driven, and lacks the influence of consumer tastes and preferences that impacts the value and demand for automobiles. Trucks in this deal are viewed mainly as a revenue-generating asset.
On the other hand, commercial trucks only tend to depreciate 15%-20% in the first year of use, while cars can depreciate up to 30% in that same time period. Beyond that, automobiles generally tend to depreciate much quicker than trucks, therefore having a shorter life.
DBRS cites the experience of Navistar as a strength of the deal, as the company completed its first issuance 25 years ago.
