The Ford Credit Auto Owner Trust program is returning to the market to issue slightly upsized $828.2 million in auto asset-backed securities, with a couple of lower yield supplement credit enhancement levels compared with the 2022-REV1 deal.
Slated to close in mid-February, FCAOT 2023-REV1's initial overcollateralization of its initial pool balance amount is -0.50%, a 50 basis point drop from the previous deal, according to ratings analysts from S&P Global Ratings. When FCAOT 2023-REV1 prices its minimum supplement discount rate is expected to be 3.55% to produce excess spread, one of the deal's forms of credit enhancement. The FCAOT 2022-REV1 had a yield excess spread target of 3.85%, S&P's analysts said.
As a percentage of the initial adjusted pool balance, the initial yield supplement overcollateralization amount was 11.67%, down from 14.38%, S&P said.
A group of five banks—J.P. Morgan Securities, SMBC Nikko Securities America, TD Securities, Credit Agricole Securities and Lloyds Securities are lead underwriters on the deal, according to Moody's Investors Service. FCAOT 2023-REV1 has a five-year revolving period, which could change the pool quality over time and expose the deal to performance uncertainty, according to Moody's analysts. The revolving period was similar to previous deals from the program, however, and the program has a long securitization history— sixteen previous deals—with strong performances according to Moody's analysts.
Moody's analysts did note that previous deals had seen their performances decline slightly. Should FCAOT 2023-REV1 satisfy its pool composition tests only, then the rating agency expects a cumulative net loss (CNL) of 2.50%, and loss at the Aaa stress level of 10.50%. If the transaction satisfies its floor credit enhancement tests, then Moody's expects a CNL of 2.00% and Aaa stress level loss of 9.50%.
Similar to four recent FCAOT REV transactions, the current deal's collateral pool includes loans with an original term greater than 72 months. Longer term loans general experience higher volatility, because they have a greater exposure to a borrower's life event or economic downturn, Moody's said. Ford Credit, however, adjusted for that by expanding personal use, 84-month purchase quality guidelines to include lower-risk applicants and maintaining maximum advance limits, the rating agency said.
Overall, however, the underlying collateral is composed of prime quality loans, with a weighted average (WA) FICO score of 747, annual percentage rate of 4.25% and original term of 64 months.
Moody's expects to assign ratings of 'Aaa' on the class A notes; 'Aa1' on the class B notes; 'A1' on the class C notes; and 'Baa3' on the class D notes. All of the notes, benchmarked to the Interpolated yield curve, according to the Asset Securitization Report deal database, and have a legal final maturity date of August 15, 2035.
S&P intends to assign ratings of 'AAA' to the class A notes, 'AA' to the class B notes, 'A' to the class C notes and 'BBB' to the class D notes.
