NextGear, a unit of Cox Enterprises, is marketing its second offering of the year of notes backed by inventory financing for used auto dealers, according to rating agency reports.
NextGear Floorplan Master Owner Trust, Series 2016-2 will issue four tranches of notes with preliminary ratings from DBRS, Moody’s Investors Service, and Standard & Poor’s. Two classes of senior notes totaling $300 million, one fixed-rate and one-floating rate, are rated triple-A. Two tranches of subordinate notes totaling $28 million, one floating and one fixed, are rated single-A. All of the notes are expected to mature in September 2019.
The senior notes benefit from 18% credit enhancement; the subordinate notes from 10.5% credit enhancement.
The notes are backed by funds that NexGear advances to dealers to purchase primarily motor vehicle dealers of any new or used automobile, sport-utility vehicle van, minivan or light-duty truck for retail or wholesale use. Some financing is also used to purchase new or used motorcycle, moped, motor-assisted scooter or motor-driven cycle, all-terrain vehicle, golf cart, snowmobile, personal watercraft or boat-designated powersports or marine, among other collateral.
Vehicles are purchased from a variety of origination channels, including auctions, manufacturers and existing dealer-to-dealer relationships, among others.
DBRS expects 8% of the collateral to default.
NextGear’s predecessor company, DSC, was bought by Manheim in March 2012. NextGear was created in January 2013 through the merger of the two companies. Cox, a communications, media and automotive services company with an investment grade rating (triple-B), provides parental support to NextGear through a performance guaranty on the transaction, according to DBRS.