In another auto deal that could be upsized, the Ford Credit Auto Owner Trust is preparing to issue at least $1 billion in asset-backed notes secured by retail installment auto contracts.
The securitization's structure, which includes a list of credit enhancements and the experience of Ford Credit, the deal sponsor, are among the deal's positive credit attributes, according to Moody's Investors Service, which will assign ratings to the notes.
Total initial hard credit enhancement comes to 5.25% of the principal note balance. That includes a fully funded reserve account of at least 0.25% of the initial adjusted pool balance and excess spread, Moody's said. The structure offers no overcollateralization at closing, but it will build to a target of 2.00% and drop no lower than 2.00%, according to the rating agency. The class A notes benefit from a 5.00% level of subordination, which classes B and C will provide. The class B notes, in turn, benefit from subordination of 2.00% that the C notes provide.
All of the notes benefit from a reserve fund of 0.25% of the adjusted pool balance. FCAOT 2023-C will issue seven tranches of notes with legal final maturities ranging from Dec. 15, 2024 through May 15, 2031.
Moody's says it has a cumulative net loss (CNL) expectation of 0.90% in the 2023-C asset pool. The loss at a 'Aaa' stress level is 5.25%, and both levels are unchanged from FCAOT 2022-D.
The underlying leases and loans have a weighted average (WA) FICO score of 753 for the $1 billion base pool, and a 754 FICO score if the pool is up sized to $1.3 billion. Also on a WA basis the base pool has a loan-to-value ratio of 98.7%, and 98.9% of the upsized pool.
Moody's expects to assign ratings of 'P1' to the A1 notes; 'Aaa' to the A2A through A4 notes; 'Aa1' to the class B notes and 'A2' to the class C notes.
