Navistar pulls in to ABS market for $300M floorplan offering
Automakers have been apprehensive in sponsoring dealer floorplan securitizations this year, hampered by slumping auto sales and pandemic-related stresses.
But for heavy-duty truck maker Navistar Financial Corp., its largely business as usual.
Navistar Financial, a subsidiary of the truck and engine manufacturer, is marketing a new $300 million series of notes from its master trust financing the inventory of 187 dealers in its network.
Navistar Financial Dealer Note Master Owner Trust II, Series 2020-1 is the first deal for Navistar since June 2019, when it also priced a $300 million dealer floorplan offering.
The transaction includes a $251.64 million Class A notes with preliminary triple-A ratings from Moody’s Investors Service and Fitch Ratings. Because of the top-tier structured finance rating, the bonds are eligible securities for support from the Federal Reserve’s Term Asset-Backed Securities Loan Facility program.
The 10th series issue from the trust will be supported from monthly payments by dealers for the credit lines extended by Navistar Financial to finance their purchase of medium and heavy duty trucks, school buses (which account for 30% of the pool assets), truck bodies, truck and bus chassis, and trailers primarily manufactured by Navistar, according to Moody’s.
The notes are backed by a wholesale receivables pool that totaled $972.6 million as of April 2020, which mostly finances new equipment.
Nearly all of the trucks and equipment financed through the series have already been purchased by end-users.
The deal will revolve with new assets through October 2021.
Monthly payment rates in 2019 average 41.4%, a level well above trigger levels for stepped-up spreads and early amortization of notes, noted Fitch’s presale report.
And Although most dealers are not individually considered investment-grade risks, Moody’s and Fitch note that Navistar dealers have high absorption rates because of trucking companies’ heavy dependence on them for parts and service operations (in comparison to lower rates for retail automotive franchise dealers).
The plan is only the second dealer floorplan financing deal to price in 2020 (from independent dealer finance firm NextGear Capital), and the first to be launched since the outbreak of the coronavirus pandemic in March.
General Motors Financial earlier this month filed a disclosure notice of an intent to market its first wholesale dealer financing offering of 2020; road-show data firm Finsight notes it is among three floorplan deals (including Navistar) expected to launch deals this month.
Multiple outstanding floorplan securitizations, including those of NextGear, Nissan Motor Acceptance, Mercedes-Benz Financial Services and Ford Motor Credit, were placed on review for possible downgrade in March and April due to deteriorating credit conditions of their OEM parent firms.
While most were affirmed, S&P Global Ratings last week maintained a negative credit watch on 19 ratings of 10 series of Ford Credit Floorplan Master Owner Trust A as it worked to resolve the issuer rating watch for Ford Motor Co.