CHICAGO — Auto dealer floorplan
ABS transactions entering early amortization due to manufacturer or finance
company bankruptcy are largely performing within expectations, though material
concerns remain over valuation declines in a still challenged macro
environment, according to Fitch Ratings. Related pressures remain particularly
acute for the domestic OEMs with GM and Chrysler continuing to reposition after
emergence from bankruptcy.
While underlying asset performance has generally remained within
expectations, Fitch believes dealer floorplan ABS performance has benefited
materially from direct and indirect support as well as the facilitation of new
alliances. The deterioration in the financial profile of the domestic auto
manufacturers and challenges of working through significant inventory levels
has brought into sharper focus the material connections of manufacturers to
their dealers and the dealer's material role in this financing chain.
Observing the relationship between dealers, the manufacturer and the finance
company before and during bankruptcy has demonstrated operating and logistical
links uncommon in other structured finance asset classes, according to Senior
Director Ravi Gupta. Fitch believes that these linkages will make achieving
'AAA' ratings on dealer floorplan ABS associated with manufacturers with weak
credit profiles unattainable. "Other asset classes commonly feature more
granularity of their pools and direct access to the assets, significantly
influencing their ability to achieve the highest rating levels," said
Gupta.
Positively, the structural triggers tied to the recent bankruptcy filings of
General Motors Corp. and Chrysler LLC have resulted in the Superior Wholesale
Inventory Financing Trust (SWIFT) XI and Master Chrysler Financial Owner Trust
(MCFOT) transactions entering rapid amortization and paying out monthly
collections prior to their scheduled termination dates.
The other remaining transactions continue to revolve in accordance with
their transaction documents.
Should monthly payment rates and losses not materially deteriorate from
current levels, the SWIFT XI and MCFOT transactions should repay full principal
within the next few months. Key potential impacts to performance would include
new developments that would infringe on the support provided to the sector,
disorderly unwinds of dealers that have been targeted for closure or economic
conditions deteriorating further and creating additional constraint on consumer
interest in automotive purchasing.
Fitch currently rates five outstanding U.S.
auto-related dealer floorplan ABS transactions, all of which are associated
with the three
U.S.
domestic auto manufacturers and are detailed below. Fitch downgraded all
transactions on April 14, 2009 and placed each of them on Rating Watch Negative
following continued system-wide deterioration in the domestic auto industry and
the heightened financial risk of each of the auto manufacturers. Each
transaction remains on Rating Watch Negative.
