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S&P to review several Ford floorplan ABS deals for possible downgrades

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The COVID-19 outbreak struck another blow at the automotive industry Tuesday.

S&P Global Ratings announced it is reviewing 10 dealer floorplan securitizations for potential ratings downgrades, a result of its recent downgrade of Ford Motor Credit and other subsidiaries of Ford Motor Co. to junk status, in response to the coronavirus pandemic.

The ratings agency announced Tuesday it would review 19 classes of notes from 10 series of the Ford Credit Floorplan Master Owner Trust A platform, which sponsors bonds backed by receivables from inventory financing arrangements with Ford dealerships.

It is the second downgrade review instituted against an automaker in the past week. Last week, Moody’s Investors Service placed under watch three series of floorplan securitizations sponsored by Nissan Motor Acceptance Co., the U.S. captive-finance arm of Nissan Motor Co. '

The 19 tranches under review are mostly the senior and subordinate notes from all of Ford’s 2018 and 2019-vintage floorplan securitization offerings, currently ranging from AAA to AA+ ratings. S&P is also reviewing four series from 2015-2017, plus one outstanding pre-crisis floorplan deal from 2006.

The S&P ratings review is driven by S&P’s March 25 downgrade of Ford and its captive-finance lender to a speculative-grade BB+ rating from BBB-.

Floorplan ABS ratings are more influenced by an automaker’s credit standing then standard auto-loan and lease contract securitizations, given than the obligors are Ford franchised dealers whose ability to repay loans and lines of credit depend on an automaker’s financial health.

“The rating of the auto manufacturer is a key differentiating factor under our non-diversified auto dealer floorplan (DFP) ABS criteria, and there is a significant linkage between the manufacturer's rating and DFP ABS ratings,” according to S&P’s release.

S&P plans to complete its review with 90 days.

In addition to the notes placed under review, S&P affirmed the current ratings on nine classes of notes from four other Ford floorplan ABS deals issued between 2014 and 2017. All of those deals are nearing their final paydown periods, and would require a substantial 90% decline in principal collections to miss their payoff dates, according to S&P.

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Floorplan ABS Coronavirus Ford Motor Credit