Ally Master Owner Trust (Series )

Transcription

1 Presale: Ally Master Owner Trust (Series ) This presale report is based on information as of Feb. 10, The ratings shown are 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 ratings. Preliminary Rating Class Preliminary rating(i) Preliminary amount (mil. $) Interest rate(ii) Credit support (% of the invested amount) A AAA (sf) Floating B NR Fixed C NR Fixed D NR Fixed E NR N/A N/A (i)the rating on each class of securities is preliminary and subject to change at any time. (ii)the interest rates will be determined on the pricing date. NR--Not rated. N/A--Not applicable. Profile Expected closing date Feb. 22, Expected maturity date Feb 15, Final maturity date Feb 15, Interest payment date The 15th of each month beginning March 15, Collateral Sponsor Servicer A revolving pool of receivables arising from floorplan financing agreements between Ally Bank and retail auto dealers, primarily dealers of General Motors Co. ('BBB/Stable') and FCA US LLC (BB/Stable/B) vehicles, to finance their inventory of new and used autos and light- and medium-duty trucks and vans. Ally Bank, a wholly owned subsidiary of Ally Financial Inc. Ally Financial Inc. (BB+/Stable/B; formerly GMAC Inc.). Primary Credit Analyst: Jennie P Lam, New York (1) ; jennie.lam@spglobal.com Secondary Contact: Joanne K Desimone, New York (1) ; joanne.desimone@spglobal.com See complete contact list on last page(s) FEBRUARY 10,

2 Profile (cont.) Transferor/depositor Indenture trustee and backup servicer Owner trustee Underwriters Ally Wholesale Enterprises LLC, a wholly owned subsidiary of Ally Bank. Wells Fargo Bank N.A. (AA-/Negative/A-1+). U.S. Bank Trust N.A. J.P. Morgan Securities LLC, Deutsche Bank Securities, RBC Capital Markets LLC. Rationale The preliminary rating assigned to Ally Master Owner Trust's (AMOT's) $500 million class A asset-backed notes series reflects: Our view that the 25.25% hard credit support (expressed as a percentage of the series invested 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 manufacturers, General Motors Co. (GM; 'BBB/Stable') and FCA US LLC (FCA, formerly Chrysler Group; BB/Stable/B). The transaction's three payment rate triggers, which, when breached, causes either a subordination step-up period whereby the transaction's required class E invested amount increases or the reserve account required amount increases. A breach of the 25.0% three-month average payment rate trigger will require the class E invested amount to increase to 14.81% or the reserve account required amount to increase to 2.70%. A breach of the 22.5% three-month average payment rate trigger will require the class E invested amount to increase to 17.61% or the reserve account required amount to increase to 5.10%. A breach of the 20.0% three-month average payment rate trigger will require the class E invested amount to increase to 20.70% or the reserve account required amount to increase to 7.75%. The percentages are expressed as a percentage of the total invested amount. A 17.50% three-month average payment rate trigger that cannot be cured and will lead to an immediate early amortization period. Our expectation that under a moderate ('BBB') stress scenario, all else being equal, our preliminary 'AAA (sf)' rating on the class A notes will remain within one rating category of the assigned preliminary rating in the next 12 months, based on our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010). Our view of the relative financial strength of the dealers that have accounts designated to the trust (the underlying obligors of the floorplan loans), GM's and Chrysler's sizable market share in the U.S., manufacturer concentration in the trust, and our view of the collateral security's (the vehicles securing the floorplan loans) overall quality. Our view of Ally Financial Inc.'s (BB+/Stable/B; formerly GMAC Inc.) servicing experience and collateral auditing practices and our opinion of the quality and consistency of Ally Bank's account origination and account management practices. Our view of Wells Fargo Bank N.A.'s (AA-/Negative/A-1+; the backup servicer's) servicing experience and our opinion of its ability to assume the successor servicer role in the event of a servicer default. Our expectation for the timely payment of periodic interest and principal by the final maturity date according to the transaction documents, based on stressed cash flow modeling scenarios using assumptions consistent with the assigned preliminary rating. The transaction's underlying payment structure, legal structure, and cash flow mechanics. FEBRUARY 10,

3 Transaction Overview The trust's collateral consists of receivables and the related collateral security in vehicles that are financed from revolving lines of credit that Ally Bank extends primarily to GM and Chrysler retail dealers throughout the U.S. to finance inventories of new and used cars and light- and medium-duty trucks and vans. 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. Ally Bank generally charges monthly interest on the outstanding loans at a rate usually indexed to the prime rate, plus or minus a designated spread. The principal balance of the floorplan loans are due for repayment by the dealer a few days after the related vehicles are sold or leased or on a specified date based on the account's risk. The AMOT series transaction is a securitization of dealer floorplan loans originated by Ally Bank. The trust is a master owner trust that can issue notes through discrete series. The series issuance will consist of five classes of notes: classes A, B, C, D, and E. The class A note interest rate will be floating based on one-month LIBOR plus a margin that will be determined on the pricing date. The class B, C, and D notes will have fixed interest rates. Interest is not payable on the class E notes. Interest payments on the notes will be due on the 15th day of each month (or the next business day), beginning March 15, The transaction is scheduled to pay principal to the class A noteholders on Feb. 15, 2019, the expected maturity date. S&P Global Ratings' preliminary rating, however, addresses the payment of principal by Feb. 15, 2021, the final maturity date. Changes From The Series Transaction We did not rate AMOT's series , , or so we compared the series transaction with the last AMOT transaction that we rated, series The total hard credit support decreased to 25.25% of the invested amount from 26.50% for series resulting from both a reduced reserve fund to 0.50% from 1.00% and reduced subordination to 24.75% from 25.50%, each as a percentage of the invested amount. There have been no material changes in collateral performance since series because the monthly payment rates have been stable, averaging 34.18% for the 12 months ended Dec. 31, 2016, and losses have remained at 0%. The CCR on GM was raised to 'BBB/Stable' from 'BBB-/Positive' on Jan. 10, GM's operational performance in recent months has exceeded our expectations, and we believe that the company will likely maintain strong automotive cash flows and steady profitability in 2017 and 2018, albeit a slowing global automotive demand (see "General Motors Co. And General Motors Financial Co. Inc. Upgraded To 'BBB' On Improved Performance, Outlook Stable," published Jan. 10, 2017). The CCR on FCA was raised to BB/Stable/B from BB-/Positive/B on March 18, The upgrade reflects our view that FCA US LLC has stronger leverage metrics and enhanced liquidity. We continue to assess FCA US LLC as a core subsidiary of Fiat Chrysler Automobiles N.V. and the CCR on FCA will reflect our rating on Fiat Chrysler Automobiles N.V. (see "Fiat Chrysler Rating Raised to 'BB' On Stronger Leverage Due to Access to Substantial U.S. Cash; Outlook Stable," published March 18, 2016). FEBRUARY 10,

4 Primary Manufacturers 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 are GM and Chrysler 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 GM and Chrysler as differentiating factors affecting the credit quality of floorplan loans sold to the trust. GM ('BBB/Stable') A primary manufacturer of the vehicles securing receivables sold to the trust is GM. As of Jan. 27, 2017, approximately 71% of the trust pool of accounts by receivables balance consisted of GM dealers. GM is one of the world's largest automakers, based on unit sales, with worldwide vehicle sales of $9.8 million for GM's U.S. market share was approximately 17% for January GM manufactures vehicles under multiple brands--such as Buick, Cadillac, Chevrolet, and GMC--for which Ally Bank provides wholesale financing. FCA US LLC (BB/Stable/B') Another primary manufacturer of the vehicles securing receivables sold to the trust is FCA US LLC. As of Jan. 27, 2017, approximately 21% of the trust pool of accounts by receivables balance consisted of Chrysler dealers. Chrysler is one of the top four auto manufacturers in the U.S. with a market share of approximately 13% for January Chrysler vehicle brands that are wholesale financed by Ally Bank include vehicles manufactured under the Chrysler, Dodge, Jeep, Ram, Fiat, Maserati, and Alfa Romeo trademarks. Ally Financial Inc (BB+/Stable/B) Ally Financial Inc. is the servicer of the dealer accounts designated to the trust. Ally Financial Inc. has been actively servicing securitized wholesale assets since As of Sept. 30, 2016, Ally Financial Inc.'s serviced portfolio of dealer floorplan assets included $31.8 billion of principal receivables. Servicing overview Ally Financial Inc., the servicer, will deposit all interest and principal collections into a collection account within two business days of those receivables' processing date. However, if certain provisions in the transaction documents are met, including that our rating on the servicer is 'A-1' or higher, the servicer may make a single collections deposit into a collection account on the payment date. Wells Fargo Bank N.A. (AA-/Negative/A-1+), the backup servicer, will confirm certain data in the monthly investor report and become the successor servicer if, for any reason, Ally Financial Inc. is terminated as the servicer. Wells Fargo Bank N.A. services dealer floorplan receivables for itself and others. Our criteria generally limit non-diversified FEBRUARY 10,

5 ADFP asset-backed securities (ABS) ratings to six to nine notches higher than the rating on the servicer or manufacturer, unless a formal backup servicer agreement is in place (see "Global Non-Diversified Auto Dealer Floorplan Rating Methodology And Assumptions," published Feb. 5, 2015). Legal Structure Ally Bank, the originator, will sell all of the receivables generated from designated accounts, as well as the collateral security for the accounts, to Ally Wholesale Enterprises LLC, the depositor. Ally Wholesale Enterprises LLC, a bankruptcy-remote, special-purpose entity, will grant a first-priority, perfected security interest in the receivables and the collateral security to the trust, which in turn will grant a first-priority, perfected security interest to the indenture trustee on the noteholders' behalf. In rating this transaction, S&P Global Ratings 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 25.25% of the invested amount, which will be structured as follows: The subordinate class B, C, D, and E notes will equal 5.50%, 4.00%, 3.00%, and 12.25%, respectively. Additionally, the reserve fund requirement will equal 0.50%. Credit enhancement step-up period overview The class E requirement or required reserve account amount will increase, within one month, to a specific percentage of the invested amount based on the trust's three-month average payment rate as follows: The class E requirement will increase to 14.81% from 12.25% if the three-month average payment rate is less than 25.00% but greater than or equal to 22.50%. If this occurs, the seller can increase class E to the requirement by the next distribution date. Alternatively, the seller may increase the reserve fund, in lieu of increasing the class E requirement, by 2.20% of the invested amount by the next distribution date. Otherwise, an early amortization event will occur. The class E requirement will increase to 17.61% from 14.81% if the three-month average payment rate is less than 22.50% but greater than or equal to 20.00%. If this occurs, the seller can increase class E to the requirement by the next distribution date. Alternatively, the seller may increase the reserve fund, in lieu of increasing the class E requirement, by 2.40% of the invested amount by the next distribution date. Otherwise, an early amortization event will occur. The class E requirement will increase to 20.70% from 17.61% if the three-month average payment rate is less than 20.00% but greater than or equal to 17.50%. If this occurs, the seller can increase class E to the requirement by the next distribution date. Alternatively, the seller may increase the reserve fund, in lieu of increasing the class E requirement, by 2.65% of the invested amount by the next distribution date. Otherwise, an early amortization event will occur. The transaction also contains a 17.50% payment rate trigger that, if breached, will not be curable and will lead to an early amortization event. An early amortization event will occur if the class E invested amount is less than the required class E amount. An early FEBRUARY 10,

6 amortization event will occur if the reserve account amount is lower than the required amount for three consecutive monthly periods or lower than the required amount by an amount greater than the trigger amount, which is equal to 0.50% of the invested amount. Because the reserve account can decrease by up to 0.50% before triggering amortization, S&P Global Ratings assumes that the reserve account amount is 0.50% below the required amount at the time the amortization period begins in our stressed rating scenarios. The series transaction structure also incorporates an incremental subordination feature. If the collateral characteristics exceed the concentration limits established in the transaction documents (see the Concentration limits section below) or the receivables become ineligible, the class E requirement will increase by an amount equal to the excess concentration amounts or the ineligible receivable balances. Under the transaction documents, the amortization period will begin immediately on any distribution date on which the incremental required enhancement is not present. The reserve account The transaction documents will calculate the reserve account required amount as a percentage of the invested amount. The amounts held in the reserve account will be available to cover any shortfalls in monthly interest, monthly servicing fees, and uncovered defaults on any payment date. Amounts in the reserve account above the required amount will be released to the transferor as long as no early amortization event has occurred. On the legal maturity date, any amounts remaining in the reserve fund will be treated as available noteholder principal collections and applied to pay first the class A notes, until paid in full, and then sequentially to the class B, C, D, and E notes until paid in full. Structural Overview And Payment Priority Allocations The series transaction has three distinct allocation periods: revolving, accumulation, and early amortization. The revolving period will be in effect from the closing date until the earlier of the accumulation period start date or the business day immediately preceding the day when an early amortization event occurs. For all three periods, the interest collections (interest, fees, investment earnings, and recoveries) will be allocated to the notes based on the floating allocation percentage, or the notes' proportional share of trust receivables. During the revolving period, principal collections will be allocated to the series notes based on the floating allocation 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 allocation percentage. This allocation will be applied up to the monthly principal for the related collection period during the accumulation period and up to the invested amount during the early amortization period. The fixed allocation percentage will equal the series' invested amount share of the trust's assets at the end of the revolving period. The fixed allocation percentage may result in a faster amortization of the notes than if the collections were distributed based on the series' proportional share of the trust's receivables at each distribution date. FEBRUARY 10,

7 Asset test The transaction structure requires the depositors to hold 100% of the principal receivables relative to the series notes' net investment, which equals the investment minus the deposit in the note distribution account and, following election by the servicer or depositor, the note defeasance account that is allocated to pay principal. Payment priority--interest collections The series available interest collections deposited in the collection account and, solely regarding the priorities described below in items 2-5, the note defeasance account will be used to make payments on each distribution date in the priority shown in table 1. Table 1 Payment Waterfall Priority Payment 1 Monthly servicing fee; then pay, pro rata, the accrued and unpaid fees, expenses, and indemnities owed to the indenture trustee, the owner trustee, the administrator, and asset representations reviewer and any other trust fees or expenses payable by the servicer or the administrator (capped at $200,000 in any calendar year); and then the monthly backup servicing fee. 2 Class A monthly interest. 3 Class B monthly interest. 4 Class C monthly interest. 5 Class D monthly interest. 6 Series defaults(i). 7 Series notes' charge-offs that haven't been previously reimbursed. 8 Reallocated principal collections that haven't been previously reimbursed. 9 Maintain the required class E investment. 10 Maintain the reserve fund requirement. 11 All outstanding servicer advances repaid. 12 Any remaining fees, expenses, indemnities, or other amounts required according to item 1 above, pro rata, and reimburse the backup servicer for all unpaid servicer transition costs and amounts due. 13 Interest collections shortfalls for other outstanding series. 14 All remaining amounts to the certificateholders. (i)in item 6, the available interest collections will be used to cover any current monthly defaults and other items that would otherwise reduce the pool balance. The remaining amounts will then be used to make principal payments to restore any previous reductions to the series investment and to reestablish the subordination amount to its required level. If the available interest collections for the series notes are insufficient to cover the monthly expenses, a shortfall will occur. Shortfalls will first be covered by the available excess interest collections from other series in the trust, then by the available amounts in the reserve fund, then by the reallocated principal collections, and then by any available servicer advances. Any unreimbursed reallocated principal collections will result in a writedown of the available credit enhancement. If the subordination is below the required levels for any month, the reserve fund is less than the requirement for three consecutive months, or the reserve fund is less than the trigger amount, an early amortization period will begin. Payment priority--principal collections During the revolving period, the principal collections that are allocated to the series notes will be paid to the transferor in exchange for the new receivables that are sold to the trust. If the non-overconcentrated pool balance (the pool balance minus any overconcentrated receivables) is less than the requirement, then the principal collections that FEBRUARY 10,

8 would otherwise be allocated to the transferor will be deposited into the excess funding account to the extent necessary to cure the shortfall in the trust's non-overconcentrated pool balance (see the Collateral Overview And Master Trust Statistics section below for more information on concentration limits). The controlled accumulation period is scheduled to begin on the first day of the August 2018 collection period; however, the servicer may elect to extend the revolving period and postpone the controlled accumulation period. During the controlled accumulation period, the principal collections will be deposited monthly into the note distribution account or, upon election by the servier or transferor, the note defeasance account, up to the monthly principal, with the excess principal continuing to be reinvested in new receivables or shared across other series as needed. The amounts held in the note distribution account or note defeasance account during the accumulation period will be distributed to the noteholders in a soft bullet payment on the expected maturity date. The reallocated principal collections and the reserve fund will be available to make interest payments on the series notes, including any shortfalls that occur from negative carry during the accumulation period after principal collections are deposited in the note distribution account or note defeasance account. The indenture trustee is entitled to receive all investment earnings regarding funds deposited into the note defeasance account and is liable for any investment losses. This reallocation may reduce the subordination. The series transaction structure incorporates early amortization events that will occur under certain circumstances, which will initiate the early amortization period and effectively terminate the revolving or controlled accumulation period. During the early amortization period, the available principal collections deposited into the note distribution account or note defeasance account will be used on each payment date to make principal distributions, in full, to the class A, B, C, D, and E notes, sequentially, and then any remainder will be paid to the holders of the transferor's interest. Amortization events An early amortization event will occur if any of the following events occurs: Failure of the depositor, Ally Bank, or the servicer to observe or perform in any material respect any of its covenants or agreements set forth in the pooling and servicing agreement or the trust sale and servicing agreement, as applicable, and that continues unremedied for 60 days after written notice; Any representation or warranty made by Ally Bank in the pooling and servicing agreement or by the depositor in the trust sale and servicing agreement or any information contained on the list of accounts included in the trust proves to have been incorrect in any material respect when made and continues to be incorrect in any material respect for 60 days after written notice, and, as a result, the interests of the noteholders are materially and adversely affected; A 17.5% three-month average payment rate trigger occurs on any determination date; The notes become immediately due and payable as a result of an event of default; Ally Bank, the servicer, or the depositor experience a bankruptcy, insolvency, or receivership; The amounts on deposit in the excess funding account exceed 30% of the sum of the net invested amounts of all outstanding series of notes; The trust or the depositor is required to register under the Investment Company Act of 1940; A significant manufacturer (a manufacturer whose related eligible receivables account for 35% or more of the pool balance or 25% or more of the pool balance if Chrysler is the manufacturer) or a cumulative majority of FEBRUARY 10,

9 manufacturers (two or more manufacturers whose related eligible receivables account for 50% or more of the pool balance) are liquidated; The required class E invested amount exceeds the class E invested amount; Failure by the depositor to convey receivables in additional accounts to the trust within 15 business days after the day on which it is required to convey those receivables under the trust sale and servicing agreement (to remedy concentration limit excesses); The reserve fund amount is less than the reserve fund required amount on three consecutive distribution dates; The reserve fund required amount exceeds the amount on deposit in the reserve fund by more than the reserve fund trigger amount (which equals 0.50% of the invested amount unless the reserve fund required amount is increased following a payment rate trigger breach in which case the trigger amount is $0 until the higher reserve fund required amount is achieved); or The notes are not paid in full on the expected maturity date. The series transaction, similar to the issuer's previous series that S&P Global Ratings has rated, does not include amortization events related to the reorganization, under the federal bankruptcy code, of a significant manufacturer or majority of manufacturers as is typically included in other ABS dealer floorplan transactions. Only the manufacturers' liquidation will cause an early amortization event. Additionally, the depositor has up to one month to provide additional credit enhancement by either increasing class E or providing additional funds to the reserve account (see the Credit Support section above). We considered each of these factors when determining our stressed cumulative net losses in a particular rating scenario. Collateral Overview And Master Trust Statistics The collateral consists of receivables generated under lines of credit that Ally Bank extends to retail auto dealers throughout the U.S. The dealers use floorplan financing to purchase new and used motor vehicles. Floorplan loan repayments are due a few days after the related vehicles are sold or on a specified date based on the account's risk. As of Jan. 27, 2017, the trust's portfolio consisted of 1,853 designated dealer accounts and approximately $15.5 billion in total principal receivables and $13.5 billion in eligible principal receivables. The average principal balance of eligible receivables in each account was approximately $7.3 million. New vehicles make up 89.34% of the pool, and used vehicles make up the remainder. The portion of new and used vehicles in the trust has historically been stable. The weighted average spread below the prime rate that Ally Financial charges the dealers in the pool is 0.13% per year. Concentration limits The trust incorporates the following concentration limits, which are each shown as a percentage of the pool balance: Dealer concentration limits of 4% for dealers affiliated with AutoNation Inc. (BBB-/Stable/A-3) and 2% for all others; Manufacturer concentration limits of 35% for Chrysler; and A 25% used-vehicle concentration limit. Geographic distribution Table 2 shows the geographic distribution of the vehicle inventories for the receivables in the trust portfolio. FEBRUARY 10,

10 Table 2 Geographic Distribution Of Trust Receivables(i) State Receivables outstanding (%) Texas Florida 7.65 Michigan 6.87 North Carolina 5.22 California 4.78 Other (i)as of Jan. 27, Vehicle distribution Table 3 shows the trust pool's vehicle distribution by make. Chevrolet and GMC continue to make up more than 50% of the pool by receivables balance. Table 3 Vehicle Distribution(i) Make Receivables outstanding (%) Chevrolet GMC RAM 8.18 Jeep 7.61 Buick 6.97 Cadillac 4.78 Dodge 4.29 Chrysler 2.30 Nissan 1.79 Ford 1.41 (i)as of Jan. 27, Dealer financial strength and risk ratings Key factors we considered in determining the financial strength of the dealer base include 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. Ally Bank uses a proprietary dealer credit evaluation system to assign each dealer to a credit category based on various objective and subjective factors, including wholesale performance, financial outlook, capital sufficiency, and credit history (see table 4). The credit categories are as follows: "S" (satisfactory) means Ally Bank has determined that a dealer represents minimal risk, which may reflect consistently profitable operations, positive cash flow, an adequate credit base, or a satisfactory experience. "L" (limited) means Ally Bank has determined that a dealer represents moderate risk, which may reflect unprofitable operating results, inadequate cash flow, a marginal credit base, or a less-than-satisfactory experience. "P" (programmed) means Ally Bank has determined that a dealer represents significant risk from imminent financial failure and loss exposure to Ally Bank, which may reflect an unsatisfactory experience or a weak financial profile, FEBRUARY 10,

11 capacity, or capital. "N" (no credit) means Ally Bank has withdrawn an account's credit lines because there is an unacceptable degree of risk and exposure, which may be from a dealer's failure to remit principal or interest payments when due; liens, levies on, or attachments of the dealer's assets; or a significant deterioration in the dealer's financial profile. Ally Bank does not generally make further advances to a dealer that has been assigned a no-credit status. In our view, Ally Bank's credit ratings on its dealers have gradually improved since first-quarter 2010 with higher sales volumes of GM and Chrysler vehicles and dealer profitability. Table 4 Ally Dealer Credit Risk Ratings (%)(i) For the year ended Dealer category As of Jan. 27, S (satisfactory) L (limited) P (programmed) N (no credit) (i)these dealer categories reflect Ally Bank's proprietary dealer credit evaluation system. Age distribution Age distribution is the number of days that each receivable has been financed by Ally Bank, and it is expressed as a percentage of the total principal balance of the receivables (see table 5). The aging of each receivable is based on the receivable's related vehicle estimated date of delivery to a dealer (as in the case of GM vehicles) or the receivables origination date (in the case of non-gm vehicles) 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. The over-270-days receivable balance has remained stable at approximately 4% of the pool balance since Table 5 Age Distribution Of The Trust Pool of Accounts (%) Year ended Dec. 31 Days outstanding As of Jan. 27, Over 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. Overall, the monthly payment rates have been relatively stable in both the bank's portfolio and the trust since 2011, averaging approximately 35% (see table 6). FEBRUARY 10,

12 Table 6 Monthly Payment Rates Nine months ended Sept. 30 Year ended Dec. 31 Ally Bank portfolio Highest month (%) Lowest month (%) Avg. of the months in the period (%) Year ended Dec. 31 Ally Master Owner Trust Highest month (%) Lowest month (%) Avg. of the months in the period (%) Net losses Ally Bank's portfolio and the trust have had no net losses since 2008 (see table 7 for Ally Bank's loss and average receivable data). The bank portfolio's historical loss performance is influenced by significant assistance that the manufacturer offers to its dealer base. This assistance helps mitigate losses, especially during times of financial stress for the dealers. However, in our stress scenarios, we consider manufacturer financial stress, which would limit their ability to provide support to their dealer base. Table 7 Loss Experience For The Ally Bank Portfolio Nine months ended Sept. 30 Year ended Dec Avg. principal receivables balance (mil. $) 29,199 27,804 27,986 25,994 25,223 18,969 11,669 2,809 1,022 Net losses (mil. $) Net losses/avg. principal balance (%) Cash Flow Modeling Assumptions We view the CCRs on the two primary manufacturers as a differentiating factor affecting a pool's credit quality, consistent with our criteria for non-diversified ADFP loans. GM is currently rated 'BBB/Stable', and FCA US LLC is currently rated 'BB/Stable/B'. Table 8 below shows our typical ranges for stressed default-to-liquidation (DTL) and loss-given-default (LGD) ratios for a manufacturer rated in the 'BBB' or 'BB' categories. Loss assumptions In determining our cash flow stresses for this pool's DTL and LGD, we started 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' and 'BB' rating categories per "Global Non-Diversified Auto Dealer Floorplan," published Feb. 5, 2015 (see columns B and E in table 8). 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 8 to recognize certain manufacturer- and dealer base-specific FEBRUARY 10,

13 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; 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 and LGD assumptions for 'AAA (sf)' rated securities are shown in columns C and F of table 8. Column G shows the resulting loss-to-liquidation (LTL) rate based on the modeled DTL and LGD assumptions from columns C and F (LTL is the product of DTL and LGD). For GM, based on the modeled DTL, LGD, and LTL assumptions (columns C, F, and G) and assuming a 25% payment rate trigger, the resulting cumulative gross defaults are approximately 62% for a 'AAA' stress scenario. The weighted average LGD is 37%. Therefore, the overall 'AAA' stressed cumulative net loss is approximately 23% (62% multiplied by 37%). For Chrysler, based on the modeled DTL, LGD, and LTL assumptions (columns C, F, and G) and assuming a 25% payment rate trigger, the resulting cumulative gross defaults are approximately 69% for a 'AAA' stress scenario. The weighted average LGD is 39%. Therefore, the overall 'AAA' stressed cumulative net loss is approximately 27% (69% multiplied by 39%). Because our LTL stress is higher for Chrysler than for GM, our stress scenarios assume that the pool balance will consist of 35% of receivables related to Chrysler vehicles (i.e., the maximum concentration under the transaction documents) and 65% of receivables related to GM vehicles. Table 8 DTL, LGD, And LTL Cash Flow Modeling Assumptions For 'AAA (sf)' Rated ABS Manufacturer corporate credit rating 'BBB' (GM) 'BB' (Chrysler) Month Base DTL range (%) (A) (B) (C) (D) (E) (F) (G) Midpoint of base DTL range (%) Modeled DTL (%) Base LGD range (%) Midpoint of base LGD range (%) Modeled LGD (%) LTL (%) 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 four payment rate triggers: A 25.00% three-month average payment rate trigger that can be cured to the extent the seller increases either the class E invested amount to 14.81% of the total invested amount or the reserve account to 2.70% of the total FEBRUARY 10,

14 invested amount by the next distribution date; A 22.50% three-month average payment rate trigger that can be cured to the extent the seller increases either the class E invested amount to 17.61% of the invested amount or the reserve account to 5.10% of the total invested amount by the next distribution date; A 20.00% three-month average payment rate trigger that can be cured to the extent the seller increases either the class E invested amount to 20.70% of the total invested amount or the reserve account to 7.75% of the total invested amount by the next distribution date; and A 17.50% three-month average payment rate trigger that cannot be cured and will lead to an immediate early amortization period. 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 flow scenarios, we assume that the pool's liquidation rate starts at 100% of the transaction's payment rate triggers (25.00%, 22.50%, 20.00%, or 17.50%), as applicable, in the first month of the early amortization period, and then declines straight-line to 70% of the payment rate trigger (17.50%, 15.75%, 14.00% or 12.25%, 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 three additional cash flow scenarios 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 points are the 22.50%, 20.00%, and 17.50% payment rate trigger levels. Yield and coupon stresses The class A notes' coupon will be a floating rate based on one-month LIBOR with a margin that will be determined on the pricing date. The class B, C, and D notes will have fixed interest rates. The class E notes will not bear interest. 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 scenario 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 remains outstanding, and we applied the lowest monthly excess of the prime rate over one-month LIBOR when determining the excess spread for our 'AAA (sf)' 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 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 9. FEBRUARY 10,

15 Table 9 Dealer Concentration Limits Dealer (by principal receivables) Concentration limit (%) AutoNation Inc. 4.0 All other dealers 2.0 The dealer concentration base credit enhancement floor for 'AAA (sf)' rated ABS is equal to the greater of: 100% of the top dealer's concentration (4.00% in this transaction: 100.0% multiplied by 4.0%); 33% of the top five dealers (3.96% in this transaction: 33.0% multiplied by 12.0%); or 25% of the top 10 dealers. (5.50% in this transaction: 25.0% multiplied by 22.0%). All investment-grade non-diversified ADFP ABS should cover a default by the top dealer (in this case 4.0%). 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 rating incorporates 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 (sf)' 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 preliminary rating under moderate stress conditions. To test whether the preliminary 'AAA (sf)' 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 to the CCRs on the manufacturers, specifically a two-category downgrade to 'B' and 'CCC', respectively, for GM and FCA US LLC, because a CCR 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 'AAA' base level ranges for 'B' or 'CCC' 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. We then apply 80% factors to the 'AAA' assumptions to arrive at our 'AA' assumptions. Our cash flows showed that, based on these assumptions, and taking into account the 25.0%, 22.50%, 20.0%, and 17.50% payment rate trigger levels, the class A notes would not be downgraded by more than one category within 12 months of our preliminary 'AAA (sf)' rating, which is consistent with our stability criteria. Related Criteria And Research Related Criteria Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, FEBRUARY 10,

16 Criteria - Structured Finance - General: 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 Criteria - Structured Finance - ABS: Global Non-Diversified Auto Dealer Floorplan Rating Methodology And Assumptions, Feb. 5, 2015 Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Criteria - Structured Finance - RMBS: U.S. Interest Rate Assumptions Revised For May 2012 And Thereafter, April 30, 2012 Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Appendix III: Revised UCC Article 9 Criteria, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Criteria Related To Asset-Backed Securities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Securitizations By SPE Transferors And Non-Code Transferors, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Select Issues Criteria, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities, Oct. 1, 2006 Related Research Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 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 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, Analytical Team Primary Credit Analyst: Jennie P Lam, New York (1) ; jennie.lam@spglobal.com Secondary Contact: Joanne K Desimone, New York (1) ; joanne.desimone@spglobal.com FEBRUARY 10,

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