NextGear plans to issue $433 million of fixed and floating rate notes backed primarily by auto dealer floorplan receivables, according to Moody’s Investors Service.

The receivables secure loans made by NextGear 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 2015-2, are divided into two categories, one is secured by autos and light duty trucks; the other 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 duty trucks, rental and salvage vehicles and the other kinds of assets 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 notes notes. The class A notes are split into A-1 and A-2 notes having floating and fixed rates respectively. The notes benefit from hard credit enhancement of 17% and are due October 2020.

The trust will also offer $33 million of ‘A2’ rated class B, fixed rate notes that are due October 2020 and benefit from 10% hard credit enhancement.

Mitsubishi UFJ Securities is the lead manager.

This is NextGear's second securitization so far this year. The sponsor, who first tapped the market in October 2014, issued bonds last July via NextGear Floorplan Master Owner Trust, Series 2015-1.

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