News Column

Fitch: Profitable Dealer Networks a Plus for U.S. Dealer Floorplan ABS

September 3, 2014



NEW YORK--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: U.S. Dealer Floorplan ABS: Positive Momentum in 2014 (Strong Dealership Profits and ABS Asset Performance)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=756927

Profitable auto dealer networks supported by healthy demand for and sales of new and used vehicles are helping to position U.S. dealer floorplan ABS for strong performance headed into next year, according to Fitch Ratings in its annual portfolio review report.

Headed into 2015, Fitch is projecting solid asset trust metrics including stable monthly payment rates (MPR) and agings, and virtually zero trust losses.

'U.S. automobile dealerships networks are benefitting from higher auto sales, which are expected to top 16 million new units this year,' said Senior Director Hylton Heard. 'In-demand new vehicle models, the availability of cheap financing and continued economic recovery are also boosting dealership revenues and profit margins.'

Fitch's outlook for both asset and ratings performance is stable for the rest of 2014 into next year. This follows one of the most profitable years on record for U.S. auto dealers in 2013, with 2014 on track to exhibit similar dealership profit levels.

That said, there are factors that could impact dealers negatively and dent dealer profits over the next 6-to-12 months. 'Any slowdown in the U.S. economy and a dip in auto sales could crimp dealer floorplan ABS performance,' said Heard. Other potentially adverse developments include over-production resulting in bloated inventory levels; rising dealership costs including higher floorplanning interest and operational expenses; and fierce competition and/or overexpansion.

Fitch expects intense competition among dealerships over the next year going into 2015, which is nothing new to the sector. Specifically, dealership acquisitions by larger dealership groups are elevated as they look to expand and buy-out existing dealers when opportunities arise. Fitch has also witnessed acquisition activity rise this year above 2013 levels to date.

Dealer floorplan ABS issuance in 2014 will surpass 2013. Fitch also expects over $10 billion of ABS issuance this year, with the number to rise further in 2015. As of the end of August 2014, Fitch rates 28 outstanding dealer floorplan ABS series issued from six-auto related trusts and one diversified-equipment trust (totaling $23.6 billion). Of this amount, auto-backed trusts total 73.2% of all outstanding series and the remaining 26.8% are backed by diversified equipment.

'U.S. Dealer Floorplan ABS: Positive Momentum in 2014' is available at 'www.fitchratings.com' or by clicking on the above link.

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

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.



Fitch Ratings

Hylton Heard, +1 212-908-0214

Senior Director

Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004

or

John Bella, Jr., +1 212-908-0243

Managing Director

or

Media Relations:

Sandro Scenga, +1 212-908-0278

sandro.scenga@fitchratings.com

Source: Fitch Ratings


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