Fitch Affirms Ratings on BMW Floorplan MOT Following Amendment
BMW FS has removed the trust's three-month average monthly payment rate (MPR) trigger set at 45%, whereby if this trigger was hit the subordination factor would increase from 12.75% to 15.0%. As a result, the subordination factor was increased to 15.0% from the initial 12.75% at close, thus increasing total class A note credit enhancement (CE) to 18.67% from the 16.52% initial level at close.
Fitch assessed the impact of the removal of the trigger on the structure and net loss coverage levels, and concluded that there is no impact on our credit analysis of 2015-1 or the outstanding ratings. Fitch does not factor the MPR trigger, set at 45%, into its credit analysis, and utilizes a more conservative approach by only using the early amortization three-month MPR trigger set at 36% when modelling the structure and deriving its net loss coverage levels.
The increase in CE is a credit positive for the transaction, and provides a higher net loss coverage level for this series. The total 18.67% Class A note CE comprises the subordination factor of 15.0%, a 0.21% reserve and 3.46% subordination of the class B notes (not rated by Fitch).
KEY RATING DRIVERS
Good Quality of Receivables: The trust receivables are largely backed by new vehicles from dealers with strong internal dealer ratings and health in early 2016.
Asset Concentrations: Dealers and manufacturers are subject to concentration limits, mitigating the risk of individual dealer defaults and losses. Further, the exposure to individual vehicle type, model or segment is mitigated with concentration limits in place.
Strong Dealer Network: Based on a review of dealer financial metrics and BMW FS' internal dealer risk ratings, which are categorized into eight distinct groups, the financial health of the participating dealer network in viewed as currently strong in early 2016.
Strong Trust Performance: Though MPR has deteriorated in the recent months, BMWFMOT has experienced positive trends in overall performance, consistent asset yields, low agings/delinquencies and minimal dealer defaults and trust losses to date.
Adequate CE: As a result of the amendment, Class A 2015-1 CE will be 18.67% (of the series adjusted invested amount), comprising an available subordination factor, subordination of the class B notes and a non-declining cash reserve fund. Structural features like early amortization triggers mitigate events of dealer/manufacturer defaults/bankruptcies.
Consistent Origination and Servicing: BMW FS has demonstrated adequate abilities as an originator, underwriter, and servicer, as evidenced by the historical delinquency and loss performance of BMWFMOT. Fitch deems BMW FS capable of adequately servicing this series.
To conduct a rating sensitivity for the outstanding notes, under a category B Dealer Floorplan platform, Fitch assumes portfolio default levels at 5%, 10%, and 15% and under two recovery-level scenarios of 50% and 30%. Fitch modeled each series with the assumption that the above defaults have occurred, reflecting asset performance in a stressed environment. However, to date, performance for the trust has remained strong. A material deterioration would have to occur in performance to have potential negative impact on the ratings for each series.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch affirms the following outstanding notes:
BMWFMOT Series 2015-1:
--Class A notes at 'AAAsf'; Outlook Stable;
--Class B is rated NR.