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25 Nov 2008
Moody's downgrades ratings of Chrysler Financial auto floorplan deals, and places notes under review for possible downgrade
New York, November 25, 2008 -- Moody's Investors Service has taken the following ratings actions
on dealer floorplan asset-backed notes issued by Chrysler Financial
Services Americas LLC:
DaimlerChrysler Master Owner Trust 2006-A
Class A Notes downgraded from Aaa to A3, under review for further
DaimlerChrysler Master Owner Trust 2008-B
Class A Notes rated Aaa, under review for possible downgrade
These transactions feature revolving pools of receivables payable by dealers
and secured by the dealers' related inventory. The dealers'
accounts were originated and serviced by Chrysler Financial Services Americas
The actions were prompted by a significant worsening of the economic environment
as well as the additional stress on the creditworthiness of the auto manufacturer.
In October, Moody's downgraded the corporate family rating
of Chrysler Automotive to Caa2 (on review for possible further downgrade).
The downgrade reflects the expectation that the pace and severity of erosion
in the US automotive sector will severely outpace their ability to respond
effectively. This in-turn increases the potential for performance
deterioration in dealer floorplan asset-backed transactions.
In particular, a potential manufacturer's insolvency could
lead to higher dealer default rates and lower collateral recovery rates,
at a time of added operational stress for the servicer. These factors
are exacerbated by the current severe economic downturn and contribute
directly to Moody's ratings actions on these asset-backed
The current performance of the underlying receivables in the deals is
generally characterized by solid payment rates and de minimus charge-off
rates, and is in line with recent historical averages and our expectations.
However, future performance of dealer floorplan ABS is linked to
the related manufacturer and can be affected negatively through the following
• Decreased sales from a weak economy or an insolvent manufacturer
could affect dealer profitability and health, placing pressure on
dealer default rates;
• Depressed demand, particularly with current economic conditions,
could adversely affect collateral recovery values recognized upon dealer
default and liquidation;
• The operational capacity of the manufacturer could become strained
in bankruptcy, which would negatively impact its ability to manage
its dealer floorplan network;
• Uncertainty relating to the manufacturer's ability and willingness
to support the existing dealer base at existing levels could weaken dealer
• Weakened dealer health could raise the risk for dealer fraud including
sold-out-of trust occurrences;
Moody's analysis takes into account the above-mentioned risks
through a series of modeling assumptions in its floorplan simulation model.
However, the fast paced deterioration of the US auto industry,
coupled with a severe economic downturn, has necessitated the use
of more severe assumptions. For instance, dealer default
rates could rise significantly depending upon the manufacturers'
strategic move on their dealer network and their ability to navigate through
the present economy. In addition, the potential for bankruptcy
(reorganization and liquidation) has been be considered in light of Chrysler'
For the ratings that are under review for possible downgrade, Moody's
will assess, among other things, the risk of heightened dealer
default rates and lower collateral recovery values. Moody's
will also assess servicer readiness to monitor dealers and secure collateral
should numerous dealers default simultaneously. Moody's review
will also focus on the evolving situation of Chrysler and Chrysler Financial,
and the extent to which they are able to affect potential losses on dealer
floorplan ABS, particularly with the existing fast-changing
Structured Finance Group
Moody's Investors Service
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
No Related Data.
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