DBRS Confirms Ford Floorplan Auto Securitization Trust, Series 2006-3, Series 2010-F1, Series 2010-F2 and Series 2010-F3

As part of DBRS’s continued effort to provide market participants with updates on an annual basis, DBRS has today confirmed the ratings on the following notes (collectively, the Notes) issued by Ford Floorplan Auto Securitization Trust (the Trust):

– AAA (sf) Auto Floorplan Receivables-Backed Notes, Series 2006-3, Class A
– “A” (sf) Auto Floorplan Receivables-Backed Notes, Series 2006-3, Class B
– AAA (sf) Fixed Rate Asset-Backed Notes, Series 2010-F1, Class A
– AA (sf) Fixed Rate Asset-Backed Notes, Series 2010-F1, Class B
– “A” (sf) Fixed Rate Asset-Backed Notes, Series 2010-F1, Class C
– BBB (sf) Fixed Rate Asset-Backed Notes, Series 2010-F1, Class D
– AAA (sf) Floating Rate Asset-Backed Notes, Series 2010-F2, Class A
– AA (sf) Floating Rate Asset-Backed Notes, Series 2010-F2, Class B
– “A” (sf) Floating Rate Asset-Backed Notes, Series 2010-F2, Class C
– BBB (sf) Floating Rate Asset-Backed Notes, Series 2010-F2, Class D
– AAA (sf) Floating Rate Variable Funding Asset-Backed Notes, Series 2010-F3, Class A-1
– AAA (sf) Floating Rate Variable Funding Asset-Backed Notes, Series 2010-F3, Class A-2

The ratings are based on the following factors:

(1) The Series 2006-3 Class A Notes and Class B Notes have high levels of credit enhancement provided by overcollateralization equal to 9.9% of the current principal balance of the Series 2006-3 notes and a non-amortizing reserve fund that was seeded at inception with an amount equivalent to 1.5% of the current principal balance of the Series 2006-3 notes. Credit support to the Series 2006-3 Class A Notes is also provided by preferential access to collections arising from the subordination of the Series 2006-3 Class B Notes equal to 3.8% of the Notes.

(2) The Series 2010-F1 and Series 2010-F2 notes are protected by high levels of credit enhancement provided by overcollateralization equal to 15.6% of their respective current principal balance and a non-amortizing reserve account that was seeded at inception with an amount equivalent to 1% of their respective current principal balance. Credit support to the Series 2010-F1 and Series 2010-F2 Class A Notes is also provided by preferential access to collections arising from the subordination of 15.6% from the Series 2010-F1 and Series 2010-F2 Class B Notes, Class C Notes and Class D Notes. The Series 2010-F1 and Series 2010-F2 Class B Notes receive preferential access to collections from the subordination of the Series 2010-F1 and Series 2010-F2 Class C Notes and Class D Notes equal to 13.3% of the Series 2010-F1 and Series 2010-F2 notes. The Series 2010-F1 and Series 2010-F2 Class C Notes receive preferential access to collections from the subordination of the Series 2010-F1 and Series 2010-F2 Class D Notes equal to 4.6% of the Series 2010-F1 and Series 2010-F2 notes.

(3) The reserve account for each series builds up to 5.0% of their respective principal balance if the average payment rates decreases to less than 21.0%.

(4) In addition to the enhancement amounts, the aggregate Notes are supported by excess spread in the range of 1.1% to 3.8% and by eligible receivables equal to 105% of the Notes to cover any negative impact on the portfolio that arises from dilutions.

(5) Cumulative losses experienced by the Trust’s portfolio since 2006 remained at zero as Ford Credit Canada Limited (FCCL) has repurchased all the receivables from the Trust that have been impaired, even though it is not required to do so. Historical losses experienced by FCCL’s dealer floorplan portfolio were consistently low ranging from minus 0.05% to 0.40% between 2006 and 2010.

(6) The monthly principal payment rates from dealers in trust continue to be consistently high, ranging from 31.6% to 86.4% for the period November 2006 to December 2010. The annual average is trending slightly upward, going from 46.3% in 2007 to 54.1% in 2010.

(7) FCCL is a seasoned and capable seller and initial servicer and provides financing to Ford dealers throughout Canada and to a small number of non-Ford branded dealers. FCCL has demonstrated a long track record of managing a wholesale financing program with its dealers and has been in business in Canada since 1962.

(8) The performance of dealers is expected to correlate with the performance of Ford Motor Company (Ford). A strong performance of the manufacturer implies a stable supply of new vehicles and parts as well as warranty and brand support. Ford continues to demonstrate improvement in its brand positioning and liquidity evidenced by stronger financial results in 2010 resulting from its position as the top-selling brand in the United States and Canada.

(9) Structural mitigants, including a performance guarantee from its U.S parent, Ford Motor Credit Company (Ford Credit); payment rate triggers; dealer and used-vehicle concentration limits; and additional transaction triggers tied to the health of FCCL, Ford Credit, Ford Motor Company of Canada and its U.S. parent, Ford Motor Company.

(10) First-perfected security interest in new and used vehicles and, in many cases, additional security provided by each dealer in the form of personal guarantees and/or the taking of security in dealers’ holdings, represented primarily by real estate.

(11) Servicer risk addressed through the contractual inclusion of a ready backup servicer in Wells Fargo Bank, National Association.

The Trust finances the acquisition of a revolving pool of receivables originated by FCCL by issuing asset-backed securities and by incurring seller indebtedness. Collections on the receivables are used to pay the obligations of the Trust, including the interest and principal on the Notes issued. Series 2006-3, Series 2010-F1, Series 2010-F2 and Series 2010-F3 are included in “excess interest sharing group one” and in “principal sharing group one” and are entitled to share in excess interest collections and share principal collections from other series in the same group in certain situations.

The receivables relate to advances made by FCCL, known as wholesale or floorplan financing, to a variety of independent retail auto dealers in Canada to support their purchase of new and used vehicles. FCCL originates and manages the receivables, as seller and servicer, according to its underwriting standards and credit and collection policies. The policy includes an initial establishment of the credit lines for each dealer, as well as a periodic review of the creditworthiness and the payment experience, including timeliness of payment and sold-out-of-trust incidences.

As the accounts are sold on a fully serviced basis, no servicing fee is being paid as long as FCCL remains the servicer. Cash collected with respect to the receivables can be remitted to the Trust on or before each distribution date and commingled for up to one month, subject to DBRS partial-commingling criteria as outlined in the DBRS methodology “Legal Criteria for Canadian Structure Finance” (see Related Research below), if the following requirements are met: (1) FCCL is the servicer, (2) no servicer default has occurred and (3) FCCL is rated at least R-1 (middle) by DBRS. However, the servicer currently does not meet the rating threshold to permit commingling and as such must remit collections within two days of receipt and processing.

The receivables earn a floating rate of interest based on prime plus a spread. The prime rate charged to accounts by FCCL is maintained at or above the prime rate, with a prime rate floor of 4.0%. The Series 2006-3 notes bear interest at a fixed rate. To mitigate the fixed/floating risk between these notes and the floating rate generated from the receivables, the Trust entered into a swap with an acceptable financial institution. The Series 2010-F1 notes pay fixed rates of interest as well; however, typical interest rate mismatch risk here is considered low, based on the low interest rate charged on the Series 2010-F1 notes and the prime rate floor charged on the accounts. Covenants within the transaction documents require implementation of an interest rate hedge if FCCL changes rates charged to dealers and the excess interest rate spread is negatively affected. The Series 2010-F2 notes pay monthly floating rates based on the Canadian Deposit Overnight Rate (CDOR) plus a fixed spread. As the interest for both the underlying assets and the Series 2010-F2 notes are based on floating-rate indexes, which have historically maintained a consistent funding relationship and reset regularly, no hedging instruments were entered into.

Following the closing date for each series, a revolving period for the transaction commenced and continues until the commencement of the accumulation period or amortization period. During the revolving period, FCCL originates new receivables, which must meet the eligibility criteria to be added to the portfolio of accounts. On a daily basis, if the revolving period is continuing to the extent that the adjusted pool balance is greater than the required pool balance, the servicer distributes to the seller the series share of principal collections.

To protect the structure from negative interest carry during the controlled accumulation period, an accumulation period reserve account will be seeded in the two collection periods prior to the commencement of the controlled accumulation period. The accumulation reserve required amount is 0.25% of the initial principal balance of the Notes. The controlled accumulation period for Series 2006-3, Series 2010-F1 and Series 2010-F2 is scheduled to begin on May 1, 2011, December 1, 2012, and December 1, 2011, respectively, which is six settlement dates prior to the expected final payment date for each series. However, depending on the performance of the receivables, the servicer may elect to lengthen or shorten the accumulation period.

Notwithstanding the stated expected principal payment dates of the Notes, certain events may result in early repayment or delays of one or more series. Such events are called amortization events. From the date of and after the occurrence of an amortization event, principal collections allocable to this series will be used to repay the Notes. Principal on the Class A Notes will be repaid first with no principal payments on any other notes until the Class A Notes are fully repaid. Principal repayments of lower-ranked notes will be made only after more senior notes have been repaid in full. Essentially, this provides the more senior notes preferential access to the cash flows generated from the receivables for principal repayments in an amount equal to the subordination available for this class of notes.

All series of the Notes are supported by the same pool of receivables and are generally issued under the same requirements with respect to servicing, accumulation period, amortization events, priority of distributions and eligible investments. However, these requirements may be series specific. For more detailed information on the transaction structure, please refer to the rating reports of the Trust at www.dbrs.com.

The performance and characteristics of the pool and the Notes are available and updated each month in the Monthly Canadian ABS Report (see Related Research below)

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Canadian Wholesale Floorplan Methodology, which is available on our website under Methodologies.