DBRS Publishes Updated Canadian Floorplan Securitization Methodology

DBRS has today released its methodology for rating Canadian floorplan securitizations (Methodology). The publication of this Methodology is part of DBRS’s continued effort to provide market participants with updates and insight into the rationale behind DBRS’s rating opinions.

Outlining the analytical approach that DBRS takes to rating floorplan securitizations in Canada (i.e., dealer wholesale debt secured by inventory), the Methodology discusses the key elements that DBRS evaluates through qualitative and quantitative analysis. The Methodology also consolidates the various criteria, industry studies and commentaries issued by DBRS.

This Methodology features sections that provide general background information and a discussion of a range of issues. First, a detailed review of the dynamics of floorplan loans, including the role played by the manufacturer, the finance company, and the dealer network; second, a look at the various elements that DBRS reviews in assessing the risk profile of a pool of floorplan loans as an asset class in Canada; and third, a summary of core enhancement considerations, such as the various forms of enhancement acceptable and a brief analysis on the position DBRS takes on any potential filing for bankruptcy by the manufacturer or the finance company. Key statistics and assumptions are provided in accordance with the ratings scales used by DBRS to determine a particular rating for each securitization. Also, the Auto Transaction Risk Matrix previously included in the Auto Lease and Auto Loan methodology publications has been included at the end of the report to assist the reader in comparing and understanding the major risks identified within the various forms of auto and equipment securitizations available in public asset-backed securities or through multi-seller conduits.

Each DBRS rating is based on an analysis of the underlying assets of the securitization, the transaction parties involved, its legal and funding structure, and the credit enhancement available. These considerations are assessed under various stress scenarios to ensure that commensurate enhancement is available.

The Methodology is available by clicking on the link below or contacting us at info@dbrs.com.