Moody’s rates Nissan Master Owner Trust Notes

Global rating agency Moody’s has assigned provisional ratings to the Series 2013-A notes (Notes) to be issued by Nissan Master Owner Trust Receivables, Series 2013-A ( NMOTR 2013-A). The notes are backed primarily by dealer floorplan loans originated by Nissan Motor Acceptance Corporation (NMAC).

Moody’s said the ratings are based on an assessment of the quality of the underlying auto dealer floorplan receivables, which are secured primarily by new Nissan and Infiniti vehicles, as well as the strength of the structure and the experi- ence of NMAC as servicer.

The quality of the floorplan receivables was considered based upon a number of characteristics. A primary consideration is the strength of the manufacturer and the vehicles that the dealerships and the receivables have exposure. Moody’s also considered the size of the dealership base that is part of NMOTR, the dealer credit rating distribution according to NMAC’s proprietary dealer credit evaluation system, the age distribution of the receivables, and the overall trust monthly payment rate. Vehicle values under stressed scenarios were also a consideration in our analysis.

In our simulation analysis we assumed that Nissan was Baa3, three notches below its current rating of A3. The simulation analysis incorporated a stressed average dealer default rate of 35%. On average, our assumptions for recovery rates of repossessed cars from defaulted dealers was 85% for new cars and 80% for used cars. Average stressed recovery rates applied under manufacturer bankruptcy scenarios were approximately 45%-75%, with a low of 35%. Moody’s Aaa Level for NMOTR 2012-A is 16%.

The V Score for this transaction is Medium, which is equal to the Medium V score assigned for the U.S. Dealer Floorplan Loan ABS sector. The V Score indicates “Medium” uncertainty about critical assumptions such as dealer default probabilities and recovery rates. Volatility of performance based on loss experience is low, but historical data does not include key variables such as payment rates, recoveries and dealer defaults during a stressed, disorganized manufacturer bankruptcy scenario. Given that, we feel the level of historical data is only a moderate predictor of future performance of a stressed environment. Additionally, although floorplan transaction structures are typically straight-forward, the credit risk characteristics are reasonably com- plex. Therefore, despite low loss experience for the sector, the V Score for this transaction reflects the Sector score of Medium.

Moody’s V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches).

Moody’s Parameter Sensitivities: Our simulation analysis reveals Class A sensitivity down to the Aa1 level when recovery rates are stressed an additional 65%, to the A2 level with dealer defaults up to 50% and recovery rates stressed an additional 65%, and to the B2 level with dealer defaults up to 65% and a recovery rate haircut of 65%. This Parameter Sensitivity is based upon the expected amount of enhancement in NMOTR 2013-A, including potential additions to credit enhancement, upon breaching the early amortization payment rate trigger.