NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to rate Ford Credit Floorplan Master Owner Trust A (FCFMOT) series 2016-5 as follows:
--$750,000,000 class A-1/A-2 at 'AAAsf (EXP)'; Outlook Stable;
--$34,314,000 class B at 'AAsf (EXP); Outlook Stable;
--$49,020,000 class C NR;
--$29,412,000 class D NR.
Classes A-1 and A-2 will be sized according to investor demand.
KEY RATING DRIVERS
Consistent Receivables Quality: Over 90% of the trust receivables are originated from credit lines made by Ford Credit to finance new vehicle inventory. Dealer risk ratings have been stable and trending upward over the past five years. The trust's original equipment manufacturer (OEM), make and geographic concentrations are also consistent with historical levels.
Strong Dealer Network: Based on dealer financial metrics and internal dealer risk ratings, the financial health of Ford Credit's dealer network is currently strong, with healthy absorption rates and high operating income levels. Dealer defaults have been minimal.
Strong Trust Performance: FCFMOT continues to experience stable trends performance thus far in 2016, despite slowing sales and rising inventory levels. The trust's monthly payment rates (MPRs) and aging distributions have both deteriorated slightly but remain at healthy levels.
Limits Mitigate Overexposure: Concentration limits for individual dealers, vehicle types, OEMs and segments help to ensure the trust's receivables remain both consistent and diverse.
Sufficient Credit Enhancement: Initial credit enhancement (CE) for the class A notes is 24.38% (of the pool), consisting of subordination, an available subordinate amount and a cash reserve. Loss coverage provided by the structure is in excess of Fitch's expected net loss assumptions. Structural features and various triggers also help to mitigate dealer default risk and OEM bankruptcy.
Consistent Origination and Servicing: Ford Credit demonstrates adequate abilities as sponsor, originator and servicer as evidenced by the historical performance of FCFMOT. Wells Fargo Bank, N.A. (Wells Fargo) is the backup servicer for this series, consistent with prior series.
Legal Structure Integrity: The legal structure of the transaction provides that a bankruptcy of Ford Credit would not impair the timeliness of payments on the securities.
To conduct rating sensitivity for the issued notes, under a category B Dealer Floorplan platform, Fitch assumes portfolio default levels at 10%, 25%, and 40%, and under two recovery-level scenarios of 50% and 30%. Fitch modelled this series with the assumption that the above defaults have occurred and recoveries were stressed accordingly, reflecting asset performance in a stressed environment. Remaining expected loss levels were compared with the stressed loss assumption grid commensurate with various rating levels.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation to this rating action.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01
Criteria for Interest Rate Stresses in Structured Finance Transactions
and Covered Bonds (pub. 26 Oct 2016)
Global Rating Criteria for Dealer Floorplan ABS (pub. 05 May 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
Ford Credit Floorplan Master Owner Trust A, Series 2016-5 (US ABS)
Dodd-Frank Rating Information Disclosure Form
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