DBRS Confirms Ford Floorplan Auto Securitization Trust, Series 2017-F1

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

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

The rating confirmations are based on the following factors:

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

(1) The Notes are protected by high levels of credit enhancement provided by overcollateralization (OC) equal to 13.6% of their current principal balance and a non-amortizing reserve account that was seeded at inception with an amount equivalent to 1.0% of their current principal balance. Credit support for the Class A Notes is also provided by preferential access to collections arising from the subordination of the Class B Notes, the Class C Notes and the Class D Notes equal to 13.1% of the Notes’ principal balance. The Class B Notes receive preferential access to collections from subordination of the Class C Notes and the Class D Notes equal to 9.1% of the Notes’ principal balance. The Class C Notes receive preferential access to collections from the subordination of the Class D Notes equal to 3.4% of the Notes’ principal balance.

(2) In addition to enhancement amounts, the aggregate Notes are supported by excess spread of approximately 1.5%, as of May 2018.

(3) Cumulative losses experienced by the Trust’s portfolio since the issuance of the Notes remained at zero, while the monthly principal payment rates from dealers in the Trust continue to be high, ranging from 35.4% to 45.7% since the issuance of the Notes.

(4) Ford Credit Canada, as the captive finance company of Ford Motor Company (Ford, rated BBB with a Stable trend by DBRS), benefits 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 has the number one market share in Canada as at year-to-date June 2018 (15.4%).

(5) 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.

(6) Structural features 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.

For more detailed information on the transaction structure, please refer to the rating reports on 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 to the right of the screen).

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

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

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

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.