NextGear plans to issue $433 million of fixed-rate notes backed primarily by 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 called NextGear Floorplan Master Owner Trust, Series 2015-1, are divided into two categories, asset group one and asset group two. The first group is secured by autos and light duty trucks; the second group by new and used recreational vehicles, heavy-duty trucks, rental and salvage vehicles, motorcycles, boats, and other related assets.
Floorplan loans on recreational vehicles, heavy dutry trucks, rental and salvage vehicles and the other kinds of assets in the pool have typically not performed as well as loans used to finance auto inventory, according to Moody’s. However this risk is somewhat offset by the fact that only 12% of the receivables in the NextGear securitization pool can be non-auto related.
In both asset groups, 'used' assets comprise the majority of the collateral.
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.
Moody’s has assigned preliminary Aaa’ ratings to the $400 million of class A-1 note. The notes benefit from hard credit enhancement of 17% and are due July 2019. The trust will also offer $33 million of A2’ rated class B notes that are due July 2019 and benefit from 10% hard credit enhancement.
This is NextGear's second securitization; its inaugural deal was completed in October, 2014.