Industry leaders are hoping liquidity will return to marine floorplan lending with GE Capital issuing the first dealer floorplan asset-backed security under the Term Asset-Backed Securities Lending Facility, or TALF.
"This is the first real sign that liquidity is coming back to the floorplan space in the secondary markets," says Matthew Dunn, legislative director for the National Marine Manufacturers Association.
On Aug. 6, GE brought $500 million in securitized floorplan loans to market under TALF through its Dealer Floorplan Master Note Trust, including floorplan loans for marine and power sports. The marine component was the largest product share.
The federal government set up TALF to enable investors to purchase notes backed by asset-backed securities, such as floorplan receivables, in order to support the credit needs of small businesses, says Bruce Van Wagoner, president of the marine division for GE Commercial Distribution Finance.
"By bringing more investors into these asset-backed securities, the TALF program helps provide liquidity to industries that need more capital, such as the marine industry," says Van Wagoner, who corresponded with Soundings Trade Only by e-mail.
He notes that TALF is not the same as the government's Troubled Asset Relief Program (TARP) or the Temporary Liquidity Guarantee Program (TLGP). TALF is not a government bailout plan, but a loan program for investors in asset-backed securities, Van Wagoner says. "GE Capital is not making government-subsidized profits by participating in TALF," he says.
GE recently told the Marine Retailers Association of America that its marine division will use funds in line with its size and presence in GE Capital. MRAA officials say they hope this will help struggling dealers. "MRAA looks to GE's leadership to use these funds to address the very serious financial needs of marine dealers in these challenging times," says MRAA chairman Ed Lofgren.
"We will continue to work with GE, other financial institutions, and the Small Business Administration to provide much-needed capital to our industry and to help dealers get through the credit crunch affecting boat sales," Lofgren adds. "Despite the progress made so far, we have not yet seen any positive effects at the dealership level on thawing the credit freeze, but look to improvements in the near future."
NMMA's Dunn says it's difficult to say what impact GE's floorplan asset-backed security will have on the current market.
"But it's certainly good news, and we hope that it signals a thawing of the credit market," he says.
Dunn says the NMMA has been working to communicate that marine assets are well-performing assets and, although the industry is struggling, delinquency rates are low.
The NMMA has worked directly with officials at the Treasury Department, the Federal Reserve, and the Federal Reserve Bank of New York, which administers TALF, in successfully getting marine - or non-auto - floorplan ABS eligible under the TALF program, and making the terms of TALF more equitable along all asset classes.
"The only way we're going to get back to a position where lending is done on reasonable terms is that increased liquidity," Dunn says. "It is absolutely imperative that for interest rates to come down for the individual dealer, for spreads to tighten, for money to be cheaper and for lending to increase, that the securitization market in the floorplan space has to become liquid again." n
Associate editor Beth Rosenberg contributed to this story.
This article originally appeared in the October 2009 issue.