NextGear Capital plans to sell $325 million of fixed-rate notes backed by mostly auto dealer floorplan receivables, according to Moody’s Investors Service.
The receivables secure loans made by banks and captive finance companies to dealerships for the purchase of new and used vehicles from a manufacturer. Typically, the dealer pays back the loan upon the retail sale to its customer.
The dealer floorplan receivables in the trust are divided into two classifications: asset group one and asset group two. The dealer floorplan assets in the first group consist of new and used auto and light duty trucks.
The dealer floorplan assets in second group consist of new and used recreational vehicles, heavy duty trucks, rental and salvage vehicles, motorcycles, boats, and other related assets. Only 12% of the receivables can be non-auto related.
In both asset groups, 'used' assets comprise the majority of the collateral.
RBC Capital Markets has been hired as lead underwriter on the deal, NextGear Floorplan Master Owner Trust Series 2014-1. The trust will offer $300 million of class A notes rated Aaa’ with credit enhancement at 17% and $25 million of A2’ rated, class B notes with credit enhancement at 7%. The notes are due October 2019.
NextGear was formed in 2013 via a merger of Manheim Automotive Financial Services and Dealer Services Corporation, both legacy companies with extensive experience in floorplan lending, according to the Moody’s presale report.