Is this lien scenario correct?: Bank ABC opens a floor plan line of credit to finance mobile home inventory for a dealer and files a blanket UCC-1 against all inventory, A/R, FF&E, etc. Dealer approaches Bank XYZ wishing to obtain another floor plan. Bank XYZ grants the request and also files a blanket UCC-1 against the same inventory, etc. and sends the appropriate notice to Bank ABC regarding the collateral. Even though Bank XYZ is in second position on any non-floored units, Bank XYZ would be in first position on any units they specifically floored due to the Purchase Money Security Interest concept - right?

Not to my understanding. A second blanket lien will not preserve a purchase money security interest over a conflicting security interest in the same inventory. You could take a purchase money interest in subsequently acquired inventory only by notifying the holder of the conflicting security interest by stating that the person sending the notification has or expects to acquire a purchase-money security interest in inventory of the debtor and describes the inventory and then perfects that interest by the appropriate filing.

The notice was sent to the original lender at the time the second floor plan was opened describing the collateral being taken and the total amount of the floor plan granted. Is this enough? Or should the secondary bank send a notice EACH TIME a unit is floored under the line of credit? I'm not as concerned about the existing paid-for units as I am about the units being floored.

Sorry - forgot to login - this is Diana

For a definitive answer, I would highly recommend that you contact a qualified local attorney, as I'm not sure if there are any specific nuances in either the KY UCC or the interpretations of the UCC by your local courts. This is too important of an issue to base a decision that may jeopardize a substantial collateral position on advice or interpretations obtained in this forum.

Thanks anyway. I'll pass this along to our attorney.