DBRS Assigns Provisional Ratings to Ford Floorplan Auto Securitization Trust Series 2017-F1

DBRS Limited (DBRS) has today assigned provisional ratings to the following notes (the Notes) to be issued by Ford Floorplan Auto Securitization Trust (the Trust):

-- Series 2017-F1 Fixed Rate Notes, Class A (the Class A Notes) provisionally rated AAA (sf)
-- Series 2017-F1 Fixed Rate Notes, Class B (the Class B Notes) provisionally rated AA (sf)
-- Series 2017-F1 Fixed Rate Notes, Class C (the Class C Notes) provisionally rated A (sf)
-- Series 2017-F1 Fixed Rate Notes, Class D provisionally rated BBB (sf)

The Notes will be supported by a portfolio of dealer floorplan receivables originated by Ford Credit Canada Company (Ford Credit Canada or the Seller) and secured by a first-priority security interest in the underlying pool of new and used vehicle inventory. The Notes will pay a fixed rate of interest semi-annually, and principal is expected to be repaid on July 15, 2020.

The provisional ratings incorporate the following considerations:

(1) High Level of Credit Enhancement (24.38% to the Class A Notes)
There is a very high level of credit enhancement relative to historical portfolio losses provided by overcollateralization of 12.0% of the assets; 11.5% subordination available to the Class A Notes, 8.0% available to the Class B Notes and 3.0% available to the Class C Notes; a non-amortizing cash reserve of 1.0% of the issued Notes; initial excess interest rate spread of approximately 1.5%; and an Accumulation Period Reserve Account of 0.25%. Enhancement increases by 4.0% if the average three-month payment rate is less than 25.0%, and there is a requirement to increase the cash reserve to 5.0% if there is an Early Amortization Event.

(2) Operational and Brand Strength of Seller/Servicer
As the captive finance company of Ford Motor Company (rated BBB with a Stable trend by DBRS), the Seller and Servicer benefit from a financially stable parent that has significantly improved its operations and liquidity position since 2009 and has been rated investment grade since 2012 with the upgrade to BBB by DBRS in 2016. Ford was ranked as the number-one selling brand in Canada in 2016 and has maintained number-one market share as at year-to-date June 2017 (15.1%).

(3) Stable and Consistent Dealer Network
The accounts in the Trust pool represent a stable and financially healthy dealer network, with a balanced geographic representation from Ford Credit Canada’s strongest two credit tier groups that principally sell Ford-branded vehicles in Canada. The Canadian Ford dealer group has a long track record of consistently high monthly payment rates and low default rates, including through the financial crisis.

(4) Structural Protection
Structural features proposed include a performance guarantee from Ford Motor Credit Company LLC (FMCC), payment rate triggers, dealer and used vehicle concentration limits, eligibility criteria that exclude accounts with losses in the previous two years, the inclusion of Wells Fargo as the Backup Servicer and additional transaction triggers tied to the financial health of Ford Credit Canada, FMCC, Ford Motor Company of Canada and its U.S. parent, Ford Motor Company.

DBRS’s cash flow analysis applied conservative assumptions, including rapid and significant declines in dealer payment rates and in the recovery values of the underlying vehicles, combined with a rapid and significant increase in dealer defaults. Available credit enhancement is able to withstand stresses at levels commensurate with the assigned ratings.

Notes:
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodologies are Rating Canadian Wholesale Securitizations and Legal Criteria for Canadian Structured Finance, which can be found on dbrs.com under Methodologies.

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.