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Ford more exposed to longer-term contracts in $1.1B lease ABS

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The percentage of extended-term contracts in Ford Motor Credit’s second auto-lease securitization of 2019 is one of its largest-ever exposures for the sponsored shelf, according to a Fitch Ratings presale report.

The $1.11 billion Ford Credit Auto Lease Trust (FCALT) 2019-B has 20.2% of the securitization value tied to leases with terms over 36 months – up from 14.4% in FCALT 2019-A – for the captive finance firm for Ford Motor Co.

And while that is less than half of the three year-plus leases in GM Finance’s most recent traction (a 49.6% exposure), Ford’s concentration of the longer-term leases is at the highest level since 2014, Fitch’s report stated.

Ford’s new deal will pool an aggregate securitization value of $1.25 billion in vehicle leases into the deal, with an expected end-lease base value of $938.9 million.

The weighted average FICO of the obligors is 754, with average remaining terms of 11.9 months.

More than 80% of the leases are tied to pickup trucks and SUVs, with the F-150 light-duty truck (27.27% of the securitization value), Explorer SUV (16.8%) and the Escape SUV model (14.46%) representing the three top models within the collateral.

Ford Motor Credit’s trust will market three classes of senior-term notes with preliminary AAA ratings from Fitch: a $400 million Class A-2 tranche split between fixed- and floating-rate tranches due February 2022; a Class A-3 tranche maturing in October 2022 and sized at $325 million; and a Class A-4 notes offering due November 2022 totaling $75 million.

All of the Class A notes, including a Class A-1 money-market tranche of $200 million in one-year notes, are supported by 20.15% credit enhancement. (The Class A-1 notes have a preliminary F1+ rating from Fitch.)

The enhancement consists of an 11.25% overcollateralization of the deal's securitization value, a 0.25% reserve, an expected initial excess spread of 4.23% and 8.7% subordination from two lower-class note structures: Class B notes total $56.2 million with an AA rating, while the unrated Class C notes are sized at $52.4 million.

Fitch’s base case credit loss proxy of the deal is 1%, unchanged from recent FCALT deals it has rated.

Similar to Ford’s most recent auto-loan securitization, the trust is planning ahead for the possible demise of the Libor benchmark rate in 2021, prior to the notes’ maturity. Ford Motor Credit is opting to replace Libor with a new benchmark rate to be determined based on the Secured Overnight Financing Rate recommended by a public/private working committee within the Federal Reserve (the Alternative Reference Rates Committee).

BNP Paribas, JPMorgan, SMBC Nikko Securities, Credit Agricole and Morgan Stanley are the underwriters on the deal.

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