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

DBRS Ratings Limited (Morningstar DBRS) 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. Interest on the Class A Notes is subject to a cap, payments in excess of which are paid in a junior position in the waterfall. The transaction is currently in its revolving period, which is scheduled to end in November 2025.

CREDIT RATING RATIONALE
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 2024 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; and
-- No early amortisation events have occurred to date.

PORTFOLIO PERFORMANCE
As of the September 2024 payment date, the three-month average principal payment rate was 27.5%, 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
Morningstar DBRS 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 stop-ship 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 2024 payment date, credit enhancement to the Class A Notes was 97.3%, which is above the minimum required level of 30.0%.

The transaction benefits from a non-amortising reserve available to cover senior fees and capped interest amounts on the Class A Notes. As of the September 2024 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 Morningstar DBRS' 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, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the Class A Notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction is exposed to interest rate risk resulting from the difference between the floating-rate indexes applied to the Class A Notes and to the receivables; however, the transaction is unhedged.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings https://dbrs.morningstar.com/research/437781.

Morningstar DBRS 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 August 2024) https://dbrs.morningstar.com/research/437540.

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

Morningstar DBRS 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 the replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal 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 Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include investor reports provided by FCE.

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

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

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

Morningstar DBRS 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 issuer took place on 25 October 2023, when Morningstar DBRS confirmed its AAA (sf) credit ratings on the Class A Notes.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

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

Morningstar DBRS 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 Morningstar DBRS 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 Morningstar DBRS 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, Associate Managing Director
Initial Rating Date: 30 November 2021

DBRS Ratings Limited
1 Oliver's Yard 55-71 City Road 2nd Floor,
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://dbrs.morningstar.com/about/methodologies.

Master European Structured Finance Surveillance Methodology (6 August 2024)
https://dbrs.morningstar.com/research/437540.
Legal Criteria for European Structured Finance Transactions (28 June 2024)
https://dbrs.morningstar.com/research/435165.
Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024) https://dbrs.morningstar.com/research/439571.
Interest Rate Stresses for European Structured Finance Transactions (24 September 2024) https://dbrs.morningstar.com/research/439913.
Rating European Auto Wholesale Securitisations (18 September 2024)
https://dbrs.morningstar.com/research/439582.
Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024) https://dbrs.morningstar.com/research/437781.
Rating European Structured Finance Transactions Methodology (18 September 2024)
https://dbrs.morningstar.com/research/439581.

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.