Press Release

DBRS Morningstar Confirms Credit Ratings on Globaldrive Dealer Floorplan UK 2021 plc Following Amendment

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October 25, 2023

DBRS Ratings Limited (DBRS Morningstar) confirmed its AAA (sf) credit ratings on the Class A1 and Class A2 Notes (together, the Class A Notes) issued by Globaldrive Dealer Floorplan UK 2021 plc.

The credit ratings on the Class A Notes address the timely payment of capped interest amounts and the ultimate repayment of principal by the legal maturity date.

The transaction is a securitisation of auto wholesale receivables originated in the UK by FCE Bank plc (FCE) and related to the purchase and financing by motor vehicle dealers of their new car/truck inventory. Ford dealers and used vehicles are excluded. FCE’s ultimate parent company is Ford Motor Company USA. The transaction features the senior payment of a capped interest on the Class A Notes and the junior payment of interest beyond this cap, as well as the variation of the coupon on the Class A1 and Class A2 Notes depending on whether the holder of the Class A1 Notes is a conduit and certain conditions on the maturity of the receivables. The transaction is currently in its revolving period.

The confirmation is based on the following analytical considerations:
-- Portfolio performance, in terms of realised losses, principal payment rates, and yield rates as of the September 2023 payment date;
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) credit rating level in various dealer concentration and liquidation scenarios;
-- No early amortisation events; and
-- An amendment to the transaction effective on 13 November 2023.

AMENDMENT
The amendment includes the following:
-- The extension of the revolving period to the November 2025 payment date.
-- The extension of the legal final maturity date to the November 2028 payment date.
-- An increase of the Class A Notes’ margins by 0.17%.

PORTFOLIO PERFORMANCE
As of the September 2023 payment date, the three-month average principal payment rate was 30.1%, higher than the early amortisation trigger level of 18.0%, and the annualised portfolio yield was 15.5% (including interest income generated through the discount mechanism). Realised losses were zero.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar reviewed the historical data provided and maintained its expected default rate for the portfolio at 4.0%, with an increase in the default rate up to 52.5% and a decline of the payment rate by 55.0% at the AAA (sf) credit rating level.

CREDIT ENHANCEMENT
Credit enhancement to the Class A Notes consists of the subordination of the unrated Class B Notes and overconcentration from ineligible receivables (those where the dealer concentration exceeds 2.0%) and stopship receivables (those for which Ford UK has temporarily stopped the delivery of vehicles to a dealer to allow repairs for quality or other reasons).

As of the September 2023 payment date, credit enhancement to the Class A Notes was 98.5%, which is above the minimum required level of 30.0%.

The transaction benefits from a nonamortising reserve available to cover senior fees and capped interest amounts on the Class A Notes. As of the September 2023 payment date, the reserve’s outstanding balance was at its target level of GBP 3.0 million.

Barclays Bank PLC (Barclays) is the account bank for the transaction. Based on DBRS Morningstar’s account bank reference rating of A (high) on Barclays (which is one notch below the DBRS Morningstar public Long Term Critical Obligations Rating of AA (low)), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent to the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction is exposed to interest rate risk because of the difference between the floating-rate indexes applied to the Class A Notes and to the receivables. No hedging counterparty has been appointed for the transaction, and DBRS Morningstar applied its “Interest Rate Stresses for European Structured Finance Transactions” methodology.

DBRS Morningstar’s credit ratings on the Class A Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

DBRS Morningstar’s credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, the credit ratings on the Class A Notes do not address the uncapped interest amounts on the Class A Notes.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in British pound sterling unless otherwise noted.

The principal methodology applicable to the credit ratings is: “Master European Structured Finance Surveillance Methodology” (6 October 2023), https://www.dbrsmorningstar.com/research/421598/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in this transaction are listed at the end of this press release.

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

DBRS Morningstar has conducted a review of the amended transaction legal documents provided in the context of the aforementioned amendment. A review of the remaining transaction legal documents was not conducted as the documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/421590.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The sources of data and information used for these credit ratings include investor reports and the following historical data provided by FCE:
-- Monthly payment rates of the securitized portfolio covering a period from September 2016 to July 2023.
-- Monthly dealer concentrations of the securitized portfolio covering a period from June 2017 to July 2023.
-- Monthly receivables ageing data of the overall book covering a period from September 2016 to July 2023.
-- Dealer risk ratings of the overall book in December 2022 and July 2023.
-- Status dealers of the overall book since 2016.
-- Monthly dealer set-off data of the overall book covering a period from September 2016 to July 2023.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit ratings, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the credit rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this transaction took place on 30 November 2022, when DBRS Morningstar confirmed its credit ratings of AAA (sf) on the Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Petter Wettestad.

Information regarding DBRS Morningstar credit ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

-- Annualised default rate: 4.0%.
-- Monthly principal payment rate: 16.0%
-- Maximum annualised default rate stress under the AAA (sf) scenario: 52.5%.
-- Maximum monthly principal payment rate decline under the AAA (sf) scenario: 55.0%.

Scenario 1: A 25% increase in the annualised default rate
Scenario 2: A 50% increase in the annualised default rate
Scenario 3: A 25% decrease in the monthly principal payment rate
Scenario 4: A 50% decrease in the monthly principal payment rate

DBRS Morningstar concludes that the expected credit ratings under the four stress scenarios are:
-- Class A Notes: AAA (sf), AAA (sf), AA (high) (sf), and BB (high) (sf), respectively.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Petter Wettestad, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 30 November 2021

DBRS Ratings Limited
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London EC1Y 1HQ United Kingdom
Tel. +44 (0) 20 7855 6600
Registered and incorporated under the laws of England and Wales: Company No. 7139960

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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