Ford Credit Canada has issued its first floorplan securitization since 2013, and ratings agency DBRS expects the new issuance will perform similarly well despite a slowing auto market.
The $460 million securitization is backed by floorplan receivables on an inventory of Canadian vehicles at Ford dealerships. DBRS notes the issuance’s strength is the lender’s “stable and consistent” dealer network that produces high payment rates and low defaults.
Ford Credit Canada’s 2013 transaction matured in June 2016 with no losses, and its new issuance’s capital structure is identical for each class of notes. The backing of parent company Ford Motor Co. makes it more stable, DBRS added.
Ford retail sales are heavily concentrated in light trucks — 85% of sales in 2016 — and while those vehicles hold high values now, they are more impacted by rising gas prices and residual values would take a hit if that happened, DBRS said in the pre-sale report.
Excess volume in the auto market in the coming years could also be a cause of concern if too many vehicles are left sitting on the lots, according to the report. However, Ford in particular has been forthcoming with its plans to limit production.
“Ford is very focused on slimming down inventory and has, or will, implement plant shutdowns to avoid excess inventory sitting on its dealers’ lots,” analysts said in the report. “The successful focus on inventory management has been a contributor to the return of North American manufacturers to investment-grade status.”
The transaction is expected to close on July 25.
