Fitch Publishes Updated Global Dealer Floorplan Rating Criteria

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings today published an updated Asset-Backed sector specific criteria report titled "Global Rating Criteria for Dealer Floorplan ABS." This report updates and replaces the prior criteria report with the same name, dated January 2015.

The report presents Fitch's analytical approach to rating global dealer floorplan ABS and outlines the unique features of these transactions.

The report details key rating drivers associated with dealer floorplan ABS as detailed below.

Dealership Risks: Fitch evaluates the potential impact on the dealership network in the event of the manufacturer(s) and lender/servicer bankruptcy. Additionally, Fitch assesses the magnitude of dealer defaults and other related events, such as sold-out-of-trust (SOT) events (when products are sold and the proceeds are not submitted by the dealer to the lender) in its determination of dealer risk, subsequently deriving the dealer resuscitation factor. The assessment of dealer-default frequency is conducted by analyzing four systemic risk drivers in each DFP platform, namely product diversification, product type, manufacturer health and diversification, and manufacturer support.

Asset Performance: Fitch's asset analysis addresses the risk of performance variations by analyzing historical metrics including asset yield, purchase rates, delinquencies/agings, monthly payment rates (MPRs), asset recovery rates, excess spread, defaults/losses, and deriving steady state/base case assumptions and stresses to test the impact of deterioration of asset performance on a transaction.

Macroeconomic Risks: The economic environment can have a material impact on global DFP ABS. Fitch takes into consideration the strength of the economy and near-term future economic expectations during its dealer default analysis.

Structural Risks: Structural features have a significant impact on DFP performance. Fitch uses an internal Microsoft Excel-based cash flow model to evaluate transaction structures by stressing various performance assumptions mentioned above.

Operational and Servicing Risks: These risks include the repossession and subsequent collateral/product liquidation process, and the effect on asset values and related risks that follow an event of bankruptcy and such subsequent liquidation. It also includes operational (originations, underwriting and servicing) and corporate reviews. This portion of the analysis is largely qualitative and includes a review of the lender's servicing operations.

Legal Risks: Fitch's legal analysis of the transaction includes a review of the legal structure and the opinions furnished to confirm that the cash flow derived from the assets will not be impaired or diminished.

Counterparty Risks: The analysis incorporates a review of transaction counterparty risks to determine and ensure consistency with Fitch's counterparty criteria titled "Counterparty Criteria for Structured Finance and Covered Bonds" (Counterparty Criteria) (May 2014). This includes a review of other counterparty-related issues, such as analysis of commingling of remittance collections and segregation of bank accounts, consistent with Fitch's counterparty criteria for structured finance transactions.

Additional information is available at 'www.fitchratings.com.

Global Rating Criteria for Dealer Floorplan ABS

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=880077

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 28 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160505005983/en/

Fitch Ratings
Hylton Heard
Senior Director
+1-212-908-0214
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Margaret Rowe
Director
+1-312-368-3167
or
John Bella, Jr.
Managing Director
+1-212-908-0243
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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