DBRS Finalizes Provisional Ratings on NextGear Floorplan Master Owner Trust, Series 2017-1

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the following notes (the Notes) issued by NextGear Floorplan Master Owner Trust, Series 2017-1:

-- $75,000,000 Class A-1 rated AAA (sf)
-- $325,000,000 Class A-2 rated AAA (sf)
-- $37,350,000 Class B rated A (sf)

DBRS has changed the previously named Class B-1 notes to Class B, and the Class B-2 notes have been Discontinued – Withdrawn as they are not being offered.

The ratings are based on DBRS’s review of the following analytical considerations:
-- The transaction parties’ capabilities with regard to originations, underwriting and the servicing and financial strength of the sponsor/servicer, NextGear Capital Inc. (NextGear).
-- The managed portfolio is currently well diversified. There are a variety of concentration limits within the structure to protect the Notes from a material shift in collateral mix.
-- Performance and quality of the pool of wholesale receivables.
-- Sufficiency of credit enhancement.
-- Portfolio Financial Servicing Company acts as warm backup servicer for the master trust. The backup servicer receives and reviews weekly data feeds from NextGear.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the special-purpose vehicle with NextGear, that the trust has a valid first-priority security interest in the assets and consistency with the DBRS “Legal Criteria for U.S. Structured Finance” methodology.

The trust assets include Receivables originated in connection with the purchase and financing by motor vehicle dealers. Funds are advanced by NextGear and are used mainly by independent dealers to purchase used and some new automobile vehicles (Asset Group One) and a limited amount of diversified products (Asset Group Two). Diversified products include recreational vehicles, marine equipment, powersport vehicles and heavy-duty trucks.

Credit enhancement for the Class A-1 and Class A-2 Notes, (collectively, the Class A Notes) as a percentage of collateral balance is 18.00%. This amount is derived from the subordination of the Class B Notes of 7.75% (as a percentage of collateral balance) and subordinated residual interest of 9.25% (as a percentage of collateral balance) for a total subordination of 17.00% and a reserve account of 1.00% (as a percentage of collateral balance). The Class B Notes benefit from 10.25% credit enhancement, which is comprised of 9.25% of the subordinated residual interest and the 1.00% reserve account. Both classes of notes will benefit from excess spread in the transaction.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Wholesale Securitizations, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

Please see the attached appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.