Ford Credit Floorplan Master Owner Trust A (Series )

Transcription

1 Presale: Ford Credit Floorplan Master Owner Trust A (Series ) Primary Credit Analyst: Michael Yeung, New York (1) ; michael.yeung@standardandpoors.com Secondary Contact: Carl J Neff, CFA, New York (1) ; carl.neff@standardandpoors.com Table Of Contents Asset-Backed Notes Series Rationale Transaction Overview Changes From The Series Transaction Ford Motor Co. ('BBB/Stable/A-2') Ford Motor Credit Co. LLC ('BBB/Stable/A-2') Legal Structure Credit Support Structural Overview And Payment Priority Collateral Overview And Master Trust Statistics Collateral Historical Performance Cash Flow Modeling Assumptions MARCH 15,

2 Table Of Contents (cont.) Sensitivity Analysis Related Criteria And Research MARCH 15,

3 Presale: Ford Credit Floorplan Master Owner Trust A (Series ) Asset-Backed Notes Series This presale report is based on information as of March 15, The rating shown is preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary rating. Preliminary Rating As Of March 15, 2016 Class Preliminary rating(i) Preliminary amount (mil. $)(ii) Interest rate (%) Credit support (% of collateral amount) A AAA (sf) Floating (i)the rating is preliminary and subject to change at any time. (ii)subject to change. The size of each class of notes will be determined at pricing. NR--Not rated. Profile Expected closing date March 30, Expected final payment date March 15, Final maturity date March 15, Interest payment date The 15th of each month beginning April 15, Collateral Sponsor, servicer, administrator, and originator Back-up servicer Depositors Indenture trustee Owner trustee Underwriters A revolving pool of receivables that were originated in connection with dealers purchasing and financing primarily Ford-manufactured new and used cars, trucks, and utility vehicles. Ford Motor Credit Co. LLC (BBB/Stable/A-2). Wells Fargo Bank N.A. (AA-/Stable/A-1+). Ford Credit Floorplan Corp. and Ford Credit Floorplan LLC. The Bank of New York Mellon (AA-/Stable/A-1+). U.S. Bank Trust N.A. JP Morgan. Rationale The preliminary rating assigned to Ford Credit Floorplan Master Owner Trust A's (the trust's) asset-backed notes series reflects: Our view that the 24.27% hard credit support, including the reserve account, (expressed as a percentage of the collateral amount) for the class A notes is sufficient to withstand our stress scenarios commensurate with the assigned preliminary 'AAA (sf)' rating. The corporate credit rating (CCR) on the primary manufacturer, Ford Motor Co. (Ford; 'BBB/Stable/A-2'). The 25.0% three-month principal payment rate trigger, which, when breached, causes a subordination step-up MARCH 15,

4 period whereby the transaction's required subordination amount (not including the reserve account) will increase to 27.5% from 23.5% of the collateral amount, or, if sufficient credit enhancement is not provided, an early amortization event will occur. The 21.0% three-month principal payment rate trigger, which, when breached, causes an early amortization event to occur. Our view of the relative financial strength of the dealers that have accounts designated to the trust (the underlying obligors of the floorplan loans) and Ford's sizable market share in the U.S., which mitigates the relatively high concentration of light trucks in its product mix (i.e., the vehicles securing the floorplan loans). Ford Motor Credit Co. LLC's (Ford Credit's) servicing experience and our opinion of the quality and consistency of its account origination, account management, and auditing practices. Wells Fargo Bank N.A.'s (the back-up servicer's) servicing experience and our opinion of its ability to assume the successor servicer role if the servicer is terminated. Our expectation of the timely payment of periodic interest and the payment of principal by the final maturity date according to the transaction documents based on stressed cash flow modeling scenarios, using assumptions commensurate with the assigned preliminary rating. The transaction's underlying payment structure, legal structure, and cash flow mechanics. Transaction Overview The collateral consists of receivables secured by vehicles from designated revolving floorplan accounts offered by Ford Credit to Ford Motor Co.'s retail automobile dealers. Each receivable is an obligation in which the dealer agrees to repay the loan amount that it incurred when purchasing a vehicle for its inventory. The related vehicle secures the receivable. The dealer generally repays the related receivables when it sells the underlying vehicle. A dealer's inventory may include new and used cars and light-, medium-, and heavy-duty trucks, which include vans and other vehicle classifications such as SUVs, crossover vehicles, and vehicles intended for fleet sales, or sales of 10 or more vehicles to a corporation or governmental agency. Medium- and heavy-duty trucks are typically delivered as incomplete vehicles or chassis cabs that the dealer may send to a third party for final assembly. The trust is a master owner trust that issues notes through discrete series. The series issuance will contain one publicly rated note class. The interest rate on the class A notes will be floating based on one-month LIBOR, with a margin that will be determined on the pricing date. The transaction is scheduled to pay principal to the class A noteholders on the expected final payment date. Standard & Poor's Ratings Services' rating, however, addresses the payment of principal by the final maturity date. Changes From The Series Transaction There are no significant changes to the transaction structure from that of the previous series issued out of this trust in February There have been no material changes in collateral performance since the previous transaction, as the monthly payment rates have been stable (averaging above 40% year to date) and losses have remained at 0%. MARCH 15,

5 The ratings on Ford Motor Co. and Ford Motor Credit Co. LLC were raised to 'BBB/Stable/A-2' from 'BBB-/Positive/A-3' on March 11, The upgrade reflects our view that Ford will sustain its recent strong operational execution over the next two years and deliver increased pretax profits as it improves its competitive position amidst a somewhat slower global economic recovery (relative to our prior expectations) (see "Ford Motor Co. And Ford Motor Credit Co. LLC Upgraded To 'BBB/A-2' From 'BBB-/A-3'; Outlook Stable," published March 11, 2016). Ford Motor Co. ('BBB/Stable/A-2') The primary manufacturer of the vehicles securing receivables sold to the trust is Ford. Ford is one of the world's largest automakers, based on unit sales, with worldwide vehicle sales of more than 6.6 million for Ford is focused on two brands: Ford and Lincoln. It also provides retail and dealer financing, leases, and insurance through its wholly-owned subsidiary Ford Credit. The company benefits from sizable market shares across most major North American vehicle segments, in particular, the full-size pickup truck market. Manufacturer-related risks The obligors of a non-diversified auto dealer floorplan (ADFP) pool are predominantly franchised dealers, and, as such, we view their financial health as being largely dependent on the financial health of the related manufacturer, which is Ford in this transaction. Accordingly, we believe a manufacturer bankruptcy--an event risk in non-diversified ADFP transactions--could decrease the manufacturer's support, such as sales incentives and other payments, to the dealer. Under this stressed scenario, the related dealer may be left with a relatively large supply of vehicles in inventory from a bankrupt manufacturer that is not providing sales support or payment reimbursements. Therefore, we view our CCR on Ford as a differentiating factor affecting the credit quality of floorplan loans sold to the trust. Ford Motor Credit Co. LLC ('BBB/Stable/A-2') Ford Credit, a wholly owned subsidiary of Ford Motor Co., was established in 1959 to provide financing for Ford vehicles and to support Ford dealers. It also provides financing services to and through dealers of Ford- and Lincoln-brand vehicles, as well as the non-ford vehicles these dealers and their affiliates sell. This transaction limits non-ford vehicles to 10% for manufacturers (other than Ford Motor Co.) that Standard & Poor's rates 'A-' or higher and 2% for manufacturers (other than Ford Motor Co.) that Standard & Poor's rates 'BBB+' or lower. Ford Credit will service the receivables according to the customary policies and procedures that it uses in servicing dealer floorplan receivables for its own account and for others. It also has web-based servicing policies and procedures that are designed to ensure common servicing practices for all receivables. Servicing overview In addition to a typical servicing and collection function, inventory monitoring is important for floorplan transactions because of the assorted parties involved, the receivables' high turnover rate, and the high value of the collateral securing the receivables. According to Ford Credit, they review the dealer's financial statements and audit its inventory and sales records regularly to evaluate the dealer's financial position and to verify that it possesses the financed MARCH 15,

6 vehicles and promptly pays each receivable following the vehicle's sale. Ford Credit engages a third-party vendor to perform on-site wholesale inventory audits, the frequency of which depends on the dealer's risk rating. Ford Credit, a Ford Motor Co. subsidiary, is the servicer for the trust, and Wells Fargo Bank is the back-up servicer. The back-up servicer must confirm certain data in the monthly investor report and become the successor servicer if, for any reason, Ford Credit is terminated as the servicer. Wells Fargo Bank services dealer floorplan receivables for itself and others. The servicer must deposit all interest and principal collections into a collection account within two business days after the receivables have been processed. However, if certain provisions in the transaction documents are met, including that Standard & Poor's short-term credit rating on the servicer is at least 'A-1', the servicer may make a single collections deposit into a collection account on the payment date. Legal Structure Ford Credit, the originator, will sell and transfer its right, title, and interest in and to all of the receivables and other floorplan assets, as well as the collateral security for the accounts to the depositors, Ford Credit Floorplan Corp. and Ford Credit Floorplan LLC. The depositors, which are both structured to be bankruptcy-remote special-purpose entities, will grant a perfected security interest in the receivables and the collateral security to the trust, which will then grant a security interest to the indenture trustee on the noteholders' behalf. In rating this transaction, Standard & Poor's will review the relevant legal matters outlined in its criteria. Credit Support According to the transaction documents, the credit support for the class A notes will total 24.27% of the collateral amount and is structured as follows: The available subordinated amount equals 23.50% of the collateral amount. The required reserve account amount for any payment date will equal approximately 1.00% of the adjusted invested amount, or 0.77% of the collateral amount. Available subordinated amount and subordination step-up period During the subordination step-up period, the transaction's required subordination amount will increase to 27.50% from 23.50% of the collateral amount if the three-month average principal payment rate is less than 25.00%. Alternatively, the depositors may raise the required reserve account amount in lieu of increasing the required subordinated amount. That increase would equal the increase otherwise required for the subordinated percentage (the subordinated percentage will increase to 37.93% from 30.72% of the series notes' initial balance during a subordination step-up period). If the depositors fail to deposit this higher amount into the reserve account on or before the distribution date, the required subordination amount will automatically increase to 27.50% of the collateral amount. The required available subordinated amount is based on the initial invested amount. An early amortization event will occur if the available MARCH 15,

7 subordinated amount is less than the required subordinated amount. The series transaction structure also incorporates an incremental subordination feature. If the dealer, manufacturer, and other collateral characteristics exceed the concentration limits established in the transaction documents or the receivables become ineligible, the required available subordinated amount level will increase by an amount equal to the excess concentration amounts. Reserve account The required reserve account amount will increase to 5.00% of the series notes' initial balance if an early amortization event occurs. The amounts held in the reserve account will be available to cover any shortfalls in the notes' monthly interest, the monthly servicing fee, and any defaults. If a reserve account shortfall occurs, available depositor collections will be deposited in the reserve account to the required amount. On the final maturity date, the funds in the reserve account will be available to pay the notes' outstanding principal amount. Structural Overview And Payment Priority Allocations The series transaction has three distinct allocation periods: revolving, accumulation, and early amortization. The revolving period goes from the closing date until the earlier of the accumulation period start date or the business day immediately preceding an early amortization event. For all three periods, the interest collections (interest, fees, investment earnings, and recoveries) will be allocated to the series notes based on the floating allocation percentage, or the series notes' proportional share of the trust's receivables. During the revolving period, principal collections will be allocated to the series notes based on the floating investor percentage. During the controlled accumulation and early amortization periods, the series notes' allocation of the trust's principal collections will be based on the fixed investor percentage, which is equal to the series notes' share of the trust at the end of the revolving period. The fixed investor percentage might cause the series notes to amortize more quickly than if the collections were distributed strictly based on the series' proportional share of the trust's receivables. Asset test The transaction structure requires the depositors to hold principal receivables equal to 100% of the sum of the series notes' initial invested amount plus the required subordinated amount. Payment priority finance charge collections On each distribution date, the indenture trustee will apply the interest collections allocated to the series notes in the priority shown in table 1. Table 1 Payment Waterfall Priority Payment 1 Class A monthly interest MARCH 15,

8 Table 1 Payment Waterfall (cont.) 2 Transaction fees and expenses to the indenture trustee, owner trustee, and asset representatives (up to $375,000 per year). 3 Servicing fee (1.0% annualized, if Ford Credit is no longer the servicer) and the backup servicing fee (0.0065% annualized). 4 Treat an amount equal to the investor default amount as the investor principal collections(i). 5 An amount up to the reserve account deposit amount. 6 Treat an amount equal to the unreimbursed investor charge-offs as the investor principal collections(ii). 7 Treat an amount equal to the unreimbursed reallocated principal collections as the investor principal collections(ii). 8 An amount needed to fund the accumulation period reserve account up to the required amount. 9 An amount equal to the servicing fees if Ford Credit is the servicer. 10 An amount needed to fund the available subordinated amount up to the required amount(iii). 11 Additional trustee fees. 12 Additional servicing fees. 13 An amount needed to cover any shortfalls in other series. 14 Any remainder to the depositor interestholders. (i)in item 4, the available interest collections will cover the current monthly defaults, if any, and other items that would otherwise reduce the pool balance. (ii)the amounts paid under items 6 and 7 will make principal payments to bring the invested amount back into parity with the performing pool balance (reimburse the noteholders for losses and reimburse the reallocated principal collections that were not covered in previous months). (iii)the amounts paid under item 10 will turbo the notes to reestablish the subordination amounts that were reduced in previous collection periods and absorb losses that the excess spread did not cover. A payment shortfall will occur if the floating interest collections for the series notes are insufficient to cover the series' servicing fees, trustee fees, the notes' monthly interest, and the series' share of defaulted receivables. Payment shortfalls will be covered first by the available excess interest collections from other series in the trust, then by available depositor collections, then by the amounts deposited into the reserve account, and then by the principal collection reallocation. Any unreimbursed reallocation of available depositor collections will result in a write-down of the available subordinated amount. If the available subordinated amount is below the required levels for any month, an early amortization period will begin. Payment priority principal collections During the revolving period, the indenture trustee will pay the depositors the principal collections allocated to the series notes in exchange for the new receivables that are sold to the trust. If the pool balance is less than the required amount, the indenture trustee will then deposit enough principal collections (that it would otherwise allocate to the depositors) into the excess funding account to cure the shortfall in the required pool balance. The controlled accumulation period can range from one to six months depending on the trust's principal payment rate and the payment maturities of any other series issued from the trust. Each month during the controlled accumulation period, the indenture trustee will deposit the principal collections into the principal funding account, up to the controlled deposit amount. The excess principal will continue to be reinvested in new receivables or shared across other series as needed. The indenture trustee will distribute the amounts held in the principal funding account during the accumulation period to the noteholders in a soft bullet (or nonguaranteed) payment on the expected final payment date. Before the accumulation period starts, the available investor interest collections will fund an accumulation period MARCH 15,

9 reserve account to provide funds to pay interest on the notes in the event of a negative carry. The transaction documents require that the amount deposited into the accumulation period reserve account equal 0.25% of the series notes' initial principal balance. The transaction structure incorporates early amortization events that will occur under certain circumstances, which would then initiate the early amortization period and end the revolving or controlled accumulation period. During the early amortization period, the indenture trustee will use the available investor principal collections and the available depositor collections (in an amount not to exceed the available subordinated amount) to make principal distributions on each payment date to the class A notes until paid in full, and then pay any remainder to the depositor interestholders. Amortization events An amortization event will occur if any of the following events occurs: The average monthly payment rate for the three preceding collection periods is less than 21% on any determination date. The available subordinated amount falls below the required subordinated amount (23.50% of the collateral amount or 27.50% of the collateral amount during a subordination step-up period) for five business days. The amount deposited into the excess funding account exceeds 30% of the sum of the adjusted invested amounts of all outstanding series the trust has issued for three consecutive collection periods. The series notes are not paid in full on the expected final payment date. The depositors fail to make the required distributions or deposits, violate other covenants and agreements, or make materially incorrect representations; and any one of these breaches is not cured within a specified period. A servicer termination event occurs that adversely affects the series notes. The series notes are accelerated following an event of default under the indenture. Events of default include failure to pay interest or principal when due, failure to observe a material covenant, or an insolvency of the issuer. Additional early amortization events include the depositors' failure to transfer the receivables from the additional accounts as the transaction documents require, Ford Credit or Ford Motor Co.'s insolvency, and the trust being subject to regulation as an investment company under the Investment Company Act of Collateral Overview And Master Trust Statistics The collateral comprises receivables generated under lines of credit that Ford Credit extends to dealers throughout the U.S. Dealers use the floorplan financing to purchase new and used cars and trucks pending their sale to the ultimate retail buyer. Substantially all of the vehicles that have been financed by the securitized floorplan loans were manufactured by Ford Motor Co. Dealers generally must repay the floorplan loan as soon as they sell the underlying vehicle. As of Dec. 31, 2015, the trust's portfolio consisted of 3,458 designated dealer accounts and approximately $20.96 billion in principal receivables with an average dealer balance of approximately $6.1 million per account. The weighted average spread above the prime rate that Ford Credit charges the dealers in the floorplan pool is 1.30% per year. MARCH 15,

10 Concentration limits The trust incorporates the following concentration limits, which are each shown as a percentage of the pool balance: Dealer concentration limits: 5% for dealers affiliated with AutoNation Inc. ('BBB-/Stable/A-3') and 2% for all others; A 4% development dealer concentration limit; A 4% fleet concentration limit; Manufacturer concentration limits: 10% for manufacturers (other than Ford Motor Co.) that Standard & Poor's rates 'A-' or higher and 2% for manufacturers (other than Ford Motor Co.) that Standard & Poor's rates 'BBB+' or lower; A 2% medium- and heavy-duty truck concentration limit; and A 20% used-vehicle concentration limit. Geographic distribution Table 2 shows the geographic distribution of the vehicle inventories for the receivables in the trust portfolio. Table 2 Geographic Distribution Of Trust Receivables(i) State Receivables outstanding (%) Texas 14.9 California 7.4 Florida 6.0 Michigan 5.5 Other 66.3 (i)as of Dec. 31, Dealer financial strength and risk ratings The obligors of a non-diversified ADFP pool are predominantly franchised dealers, and, as a result, we view their financial health as being largely dependent on the financial health of the related manufacturer. Key factors considered in determining this financial strength include the dealer base's overall profitability and net worth through business cycles, the service absorption rate (the parts and service profits expressed as a percentage of a dealer's fixed costs), and the degree to which the dealer is part of a "multibrand" dealer group. Ford Credit uses a proprietary model to assign each dealer a risk rating and ranks these risk ratings in four groups. Group I represents dealers with the lowest risk, and group IV represents dealers with the highest risk (see table 3). Ford Credit reviews each dealer's credit annually at minimum and adjusts the dealer's risk rating, if necessary. Ford Credit also uses historical performance data to identify key financial indicators that help predict each dealer's ability to meet financial obligations. These indicators include the dealer's capitalization and leverage, liquidity and cash flow, profitability, and credit history with Ford Credit. As of Dec. 31, 2015, the group III and IV combined receivable balance accounted for 1.40% of the pool balance, down from 2.8% as of Dec. 31, The group I receivable balance has accounted for more than 70% of the pool balance since In our view, the higher Ford vehicle sales volumes since 2009 have contributed to the improved risk ratings. MARCH 15,

11 Table 3 Ford Credit Dealer Risk Ratings (%)(i) Year ended Dec Group I Group II Group III Group IV Other(ii) (i)as of Dec. 31, (ii)includes dealers that have no dealer risk rating because Ford Credit only provides in-transit financing for the dealer or is in the process of terminating the dealer's financing. Age distribution Age distribution is the number of days that each receivable has been financed by Ford Credit; it is expressed as a percentage of the total principal balance of the receivables (see table 4). For receivables relating to Ford-manufactured or Ford distributed new vehicles that are in transit, the age distribution measures the age of the receivables from the date the related vehicles were released from the factory or customs, as applicable. Regarding those receivables relating to Ford-manufactured or Ford distributed new vehicles that have been delivered to the dealer, the distribution measures the age of the receivables from the date the related vehicles were actually delivered to the dealer. In our view, having more aged inventory, specifically over 270 days old, indicates lower turnover rate and potentially lower payment rates because aged inventory can precipitate inventory discounting or production cutbacks. As of Dec. 31, 2015, the over-270-days receivable balance represented 3.5% of the pool balance, down from 4.7% for the same period in 2014 and the lowest percentage since This portion of the pool balance had trended higher since 2011, but has reversed in Inventory levels were particularly strong in 2015 due to record automotive industry and Ford sales, as well as increased dealer stocking of vehicles in anticipation of model change-overs and year-end build-out. Table 4 Age Distribution Of The Trust Portfolio (%)(i) Year ended Dec. 31 Days outstanding Over (i)as of Dec. 31, Collateral Historical Performance Payment rates Payment rates denote inventory turnover and, as a result, often indicate whether inventory discounting or production cutbacks may be forthcoming. The trust's average monthly payment rates have trended lower since the 2011 average MARCH 15,

12 of 48.1% (see table 5), as the rate of increase in vehicle sales has moderated but improved during 2015 with stronger sales. Table 5 Monthly Payment Rates For Ford Credit Floorplan Master Owner Trust A Year ended Dec Highest month (%) Lowest month (%) Avg. of the months in the period (%) Net losses The trust had no net losses from (see table 6). The significant assistance that Ford Motor Co. offers its dealer base, including repurchases of certain vehicles, influences the historical loss performance. This assistance helps mitigate losses, especially during times of financial stress for the dealers. However, in our stress scenarios, we consider factors other than historical losses, when determining the transaction's ability to withstand stress-case scenarios commensurate with the assigned preliminary rating. Table 6 Ford Credit Floorplan Master Owner Trust A Loss Experience Year ended Dec Avg. principal balance (mil. $) 17,330 17,033 15,783 12,780 11,266 10,987 Net losses (mil. $) Net losses/avg. principal balance (%) Cash Flow Modeling Assumptions We view the CCR on the manufacturer as a differentiating factor affecting the credit quality of a pool of non-diversified ADFP loans. Ford is currently rated 'BBB/Stable/A-2'. For a manufacturer rated in the 'BBB' category, typical ranges for our stressed default-to-liquidation (DTL) and loss-given default (LGD) ratios are shown in table 7 below. Loss assumptions In determining our cash flow stresses for this pool's DTL and LGD, we start with base stress assumptions for DTL and LGD that are equal to the approximate midpoint of the base ranges for a manufacturer in the 'BBB' rating category as provided for in our "Global Non-Diversified Auto Dealer Floorplan" criteria. However, because we believe that the manufacturer CCR may not necessarily capture all of the credit risks associated with a non-diversified ADFP pool, our criteria provides for the adjustment of the DTL and LGD assumptions within the ranges shown in table 7 to recognize certain manufacturer- and dealer base-specific characteristics that we view as most applicable to the related floorplan loans' credit quality, such as: The dealer base's overall financial strength and the level of dealer concentrations; The manufacturer's domestic and global market share and position; MARCH 15,

13 The manufacturer's inventory and dealer management practices; and The overall quality of the vehicles being produced and the overall product mix of the vehicles securing the floorplan loans. For this transaction, our stressed DTL, LGD, loss-to-liquidation (LTL) rate, each adjusted from the base level assumptions, and liquidation rates (assuming a 25% payment rate trigger) (see table 7) leads to defaults of approximately 62%, with a severity of approximately 36% (weighted average LGD, which equals an overall cumulative net loss of approximately 22.2%). Table 7 DTL, LGD, And LTL Cash Flow Modeling Assumptions For 'AAA' Rated ABS Manufacturer corporate credit rating Month Base DTL range (%) Midpoint of base DTL range (%) Modeled DTL (%) Base LGD range (%) Midpoint of base LGD range (%) Modeled LGD (%) 'BBB' DTL--Default to liquidation rate. LGD--Loss given default. LTL--Loss-to-liquidation rate. ABS--Asset-backed securities. Liquidation rate assumption We consider the payment rate an important performance variable in dealer floorplan transactions. All else being equal, an increase in the payment rate will decrease the amount of receivables that are exposed to losses in any given month. The series transaction incorporates a 25.0% three-month average payment rate trigger, which, if triggered, causes the required subordinated amount to increase. In our view, the dealers' ability to sell vehicles in their inventory may be severely hampered if the manufacturer files for bankruptcy protection, which may cause payment rates to drop sharply because retail customers may be more hesitant to purchase the manufacturer's vehicles. In our 'AAA' stressed cash flows, we assume that the pool's liquidation rate starts at 100% of the 25.0% or 21.0% payment rate trigger, as applicable, in the first month of the early amortization period, and then declines straight-line to 70% of the payment rate trigger (17.5% or 14.7%, respectively) by month six. The remaining collateral is assumed to fully liquidate following month six. The monthly liquidation rate is equal to the monthly decline in the pool balance (i.e., the sum of the monthly principal collections from performing dealers, recoveries, and net losses, divided by the pool balance as of the beginning of the month). We also run additional cash flows to test the ability of the stepped-up credit enhancement for the class A notes to withstand 'AAA' stresses. These cash flow runs use stresses that are identical to the stresses described above, except that the starting point is the 21% payment rate trigger level. Yield and coupon stresses The interest rate on the class A notes will be floating based on one-month LIBOR, with a margin that will be determined on the pricing date. The receivables bear interest at a variable rate based on the prime rate. We applied stressed yield and coupon assumptions derived from our one-month LIBOR and Prime rate interest rate vectors (see "U.S. Interest Rate Assumptions Revised For May 2012 And Thereafter," published April 30, 2012) in our 'AAA' rating scenarios to stress the interest rate and basis risk inherent in this transaction. More specifically, we looked at how much the projected monthly prime rate exceeded the monthly one-month LIBOR rate for the period the transaction LTL (%) MARCH 15,

14 remains outstanding. We applied the lowest monthly excess of the prime rate over one-month LIBOR when determining the excess spread for our 'AAA' preliminary rating scenario. Top dealer concentrations The criteria address the risk of one or more large dealer defaults by setting a credit enhancement floor for investment-grade-rated non-diversified ADFP asset-backed securities (ABS) that could withstand the default of a percentage of the largest dealers (based on the concentration limits in the transaction documents), with an assumption that the trust has limited or no access to the underlying collateral. The dealer concentration limits specified in the documents are shown in table 8. Table 8 Dealer Concentration Limits Dealer rank (by principal receivables) Concentration limit (%)(i) 1 5.0(ii) All other dealers 2.0 (i)equals the maximum principal amount of a dealer's receivables (as a percentage of the total pool balance) that can be included in the borrowing base. (ii)autonation Inc. The dealer concentration base credit enhancement floor for 'AAA' rated ABS is equal to the greater of: 100% of the top dealer's concentration (5.00% in this transaction: 100.0% x 5.0%); 33% of the top five dealers (4.29% in this transaction: 33.0% x 13.0%); or 25% of the top 10 dealers. (5.75% in this transaction: 25.0% x 23.0%). All investment-grade non-diversified ADFP ABS should cover a default by the top dealer (in this case 5.0%). Thus, the credit enhancement available to the class A notes in this transaction exceeds the dealer concentration floor for the 'AAA' rating scenario. Sensitivity Analysis Our ratings incorporate credit stability as one of several factors that we use to determine an issuer's or an issue's creditworthiness (see "Methodology: Credit Stability Criteria," published May 3, 2010). For example, based on our rating stability definition, assigning a 'AAA' rating to a new class of dealer floorplan receivables-backed notes signifies that we do not expect the rating on the notes to fall more than one rating category within 12 months of the rating assignment under moderate stress conditions. To test whether the 'AAA (sf)' preliminary rating we assigned to the series class A notes would be vulnerable to a downgrade of more than one category we analyzed the potential changes in the CCR of the manufacturer, specifically a two-category downgrade to 'B', since it is one of the two main factors in determining the base cumulative loss levels. The second major factor, the payment rate trigger, is defined in the transaction documents. In our sensitivity analysis, we adjust our DTL, LGD, and LTL modeling assumptions to within the base level ranges for a 'B' rated manufacturer. We also make qualitative adjustments to the base levels, consistent with our criteria, to determine our assumption for each within the base level range. MARCH 15,

15 Related Criteria And Research Related Criteria Methodology And Assumptions For Ratings Above The Sovereign--Single-Jurisdiction Structured Finance, May 29, 2015 Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015 Global Non-Diversified Auto Dealer Floorplan Rating Methodology And Assumptions, Feb. 5, 2015 Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 U.S. Interest Rate Assumptions Revised For May 2012 And Thereafter, April 30, 2012 Understanding Standard & Poor's Rating Definitions, June 3, 2009 Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Legal Criteria For U.S. Structured Finance Transactions: Criteria Related To Asset-Backed Securities, Oct. 1, 2006 Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities, Oct. 1, 2006 Legal Criteria For U.S. Structured Finance Transactions: Appendix III: Revised UCC Article 9 Criteria, Oct. 1, 2006 Related Research Ford Motor Co. And Ford Motor Credit Co. LLC Upgraded To 'BBB/A-2' From 'BBB-/A-3'; Outlook Stable, March 11, 2016 We Expect That U.S. Auto Sales Will Approach 18 Million Units In 2016 After Setting An All-Time High In 2015, Jan.7, 2016 Twenty-Seven Ratings Raised And 56 Affirmed From 28 U.S. Non-Diversified Auto Dealer Floorplan ABS Transactions, Feb. 10, 2015 Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, July 2, 2014 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, MARCH 15,

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