MOODY'S RATES FALCON 2003-1 AUTO DEALERSHIP LOAN ABS DEAL
Approximately $130 Million of Asset Backed Securities Rated.
New York, February 04, 2003 -- Moody's Investors Service assigned ratings to seven classes of Falcon
Auto Dealership Loan Trust Certificates, Series 2003-1.
The transaction is the fourth securitization of loans originated by Falcon
Financial, LLC (Falcon). To date, Falcon's three previous
asset-backed securities have performed as expected. Currently
there are no delinquencies in any of the existing pools and to date,
the pools have experienced only one obligor default (in the 2001-1
pool). Moody's said the ratings reflect the credit quality of the
underlying pool of loans, the credit support provided by available
subordinate amounts, the transaction's structure, the abilities
of the master servicer (BNY Asset Solutions LLC) and the special servicer
(Falcon), and Falcon's underwriting policies and procedures.
The complete rating actions were as follows:
Issuer: Falcon Auto Dealership LLC Auto Dealership Loan Trust Certificates,
$72,185,000 4.856% Auto Dealership Loan
Trust Certificates Series 2003-1Class A-1, Aaa
$26,557,000 6.089% Auto Dealership Loan
Trust Certificates Series 2003-1Class A-2, Aaa
$ 8,464,000 6.694% Auto Dealership Loan
Trust Certificates, Series 2003-1Class B, Aa2
$ 5,642,000 7.074% Auto Dealership Loan
Trust Certificates, Series 2003-1Class C, A2
$ 6,348,000 7.836% Auto Dealership Loan
Trust Certificates, Series 2003-1Class D, Baa2
$ 4,231,000 6.000% Auto Dealership Loan
Trust Certificates, Series 2003-1Class E, Ba2
$ 6,348,000 6.000% Auto Dealership Loan
Trust Certificates, Series 2003-1Class F, B3
Auto Dealership Loan Trust Certificates, Series 2003-1Class
The Aaa ratings of the Class A-1 and Class A-2 certificates
reflect the credit enhancement provided by the subordination of the Class
B, Class C, Class D, Class E, Class F Certificates,
as well as the subordination of the $11,285,558.11
Class G (which are retained Owner Trust Certificates representing 8%
of the cut off pool balance). Moody's did not rate Class G Owner
RELATIVELY HIGH PERCENTAGE OF FEE SIMPLE COLLATERAL; SUBSTANTIAL
The securities are ultimately backed by collections from a $141,060,558
pool of loans made by Falcon to the operators of 20 franchised car and
truck, and two motorcycle dealerships. Moody's analysis considered
the historical default rates experienced by new and used franchised dealerships
as well as the risks that are unique to car and truck dealerships.
According to Shorie Darnaby, a Moody's Senior Credit Officer,
compared to many other securitized franchise loan pools, this transaction
benefits from a relatively high percentage of fee simple mortgage values
which accounted for about 65% of the cut off pool balance.
In the event of an obligor default, loans secured by fee-simple
mortgages should experience higher recoveries than loans secured by other
types of collateral. The credit enhancement levels reflect the
pool's relative lack of diversity as well as the volatility surrounding
the recovery rates on the collateral.
The securitized pool includes only 22 borrowers and the largest five and
ten borrowers are obligated for approximately 45% and 68%
of the cut off pool balance, respectively. Additionally,
the largest borrower is obligated for approximately 14.1%
of the cut off pool balance. The lack of diversity magnifies the
impact that the default of any one obligor could have upon the portfolio.
About 60% of the cut off loan balance (and all but four loans)
mature between 2016 or 2018, indicating that the pool's diversification
should remain relatively stable throughout the duration of the transaction
assuming historical Falcon pools' performances stay the same. Two
loans accounting for about 19% of the cut off pool balance mature
between 2013 and 2014.
The performance of the pool could be negatively impacted by any economic
downturn that results in lower automobile and light duty truck sales volume
in the states in which the pool has geographical concentrations (Texas
20.5%, New York 14.3%, Colorado
10.9%, Virginia 7.2%, Illinois
6.8%, New Jersey and California each about 6.7%,
and the remaining nine states each lower than 4.8% of the
cut off pool balance). Moreover, this pool is exposed to
dealership brand concentrations from GM (mostly Chevrolet) and DaimlerChrysler
(mostly Dodge) of approximately 40.3%, and 35.9%
of the cut off pool balance, respectively. Therefore,
the performance of the pool may be negatively impacted if demand for Chevrolet
or Dodge declines.
SEQUENTIAL-PAY STRUCTURE WITH IO CERTIFICATES
The certificates will distribute principal and interest sequentially with
the payment of interest on each class subordinated to the payment of principal
due on more senior classes. The Class A-1 through Class
F certificates represent ownership interests in notes that were issued
by Falcon Auto Dealership Loan Trust 2003-1. The notes are
similar in size and payment priority to the rated certificates and are
secured by the underlying loan pool.
The Class IO certificates will receive interest collections from two separate
components. The IO certificates will receive amounts equaling the
product of the loan strip rate and the balance of each outstanding loan
in the securitized pool. The IO certificates will also receive
amounts equaling the product of the strip rate specified for each class
of the Class A-1 through Class D notes and the balance of the related
class of notes.
BNY ASSET SOLUTIONS TO ACT AS MASTER SERVICER
BNY Asset Solutions LLC (BNY) will act as the master servicer, and
Falcon will be appointed as the special servicer. BNY is a subsidiary
of the Bank of New York (Aa2/Prime-1/B+) and has extensive
experience servicing commercial mortgage portfolios. As the master
servicer, BNY will be responsible for payment processing,
monitoring insurance coverage, tax compliance, and advancing
any delinquent interest and principal amounts. As the special servicer
Falcon will be responsible for servicing delinquent and/or defaulted loans
and managing any foreclosures.
FALCON FINANCIAL, LLC
Founded in 1997, Falcon is a specialty finance company that lends
to franchised vehicle dealerships. Moody's does not rate Falcon.
For its underwriting, Falcon focuses on the cash flow generated
by the business, its enterprise value, and the value of any
assets that can be used as collateral such as real estate, leasehold
mortgages, and equipment.
Further information is available on www.moodys.com
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Structured Finance Group
Moody's Investors Service