Ford Credit Auto Owner Trust is preparing to get back to the market with its first public retail deal of 2024, a sale of about $1.3 billion in notes that could be upsized to $1.5 billion. A pool of prime-quality, retail installment auto contracts.
Ford Motor Credit originated the contracts, sold them to the transaction, is custodian and will also act as servicer, according to Moody's Investors Service. Mitsubishi UFJ Securities, Société Générale, and J.P.Morgan Securities are managers on the deal, which is slated to close on March 19, according to details from Asset Securitization Report's Deal Database.
The notes benefit from a total initial credit enhancement of 5.25% on all of the class A notes; 2.25% on the class B notes and 0.25% on the class C notes.
The deal will issue A, B, C and D class notes through seven tranches, five of which are class A notes, according to the ASR database. Most of the notes will be priced over the three-month interpolated yield curve, except for the A2B notes, which are expected to price at 36 basis points over the 30-day Secured Overnight Financing Rate (SOFR). Otherwise, spreads range from 13 basis points over the three-month I-Curve on the A1 notes to 93 basis points over the three-month I-Curve on the C notes.
All of Ford's attributes as an experienced lender and servicer, the collateral pool's strong credit quality and previous transactions' strong performance through periods of economic stress.
The deal has some credit challenges, though, including the fact that 9.3% of the loans had original terms greater than 75 months. While this is similar to previous deals that Moody's has rated, longer term loans carry the risk of exposure to life or economic events. The class A2B notes, which pay a coupon based on the 30-day average SOFR. There is some potential unhedged floating rate liability, Moody's said, noting that the assets pay a strictly fixed rate of interest, so a spike in interest rates could erode whatever excess spread the notes generate.
Other than subordination and the excess spread, however, a cash reserve account representing 0.25% of the pool balance, and overcollateralization provide credit enhancement to the deal.
Fitch Ratings analysts assigns ratings of F1+ to the A1 notes; AAA to the A2A through A4 notes; and AA to the class B notes. Moody's is P1 to the A1 notes; Aaa to the A2A through A4 notes; and Aa2 to the class B tranche.
The notes have legal final maturity dates that range from April 15, 2025, through Sept. 15, 2031.
