Ford Motor Credit Co. is out with its first auto lease securitization of 2016, according to Fitch Ratings.
The pool is backed 48,082 leases totaling $1.12 billion, a level consistent with Ford’s two previous deals completed in 2015.
The $952 million Ford Credit Auto Lease Trust 2016-A will issue seven tranches of notes, including a $167 million class A-1 money-market slice rated ‘F1’ and five tranches with preliminary ‘AAA’ ratings: A $413 million tranche will be split into fixed- and floating-rate notes due November 2018; a $228 million Class A-3 tranche maturating in April 2019, and a $94 million tranche maturing in July 2019.
All of the senior tranches have initial hard 20.4% credit enhancement.
There will also be a $50.7 million tranche of class B notes mature in August 2019 rated ‘AA’ with 15.9% credit enhancement; and an unrated $47.3 million class C tranche due October 2020 with a CE of 11.7%.
According to Fitch, the credit quality of the leases – with an average APR of 1.72% and owners with average FICOs of 742 – is consistent with other recent pools of manufacturer captive finance lease securitizations, such as Hyundai Auto Lease Securitization Trust 2016-A and Nissan Auto Least Trust 2015-B. The leases have an average remaining term of 23.6 months, from a pool of leases where more than 82% were originally for terms over 36 months.
Ford’s lease pool consists mostly (69.26%) of the sport-utility and truck segments of its model lineup, with the Escape and Explorer sport-utility vehicles account for 35.99% alone.
Fitch issued primarily neutral assessments of the residual value risks of the vehicles in the pool, noting a 29.56% residual loss rate and the high percentage (48.02%) of lease maturities beyond March 2018 that make predictions on wholesale used vehicle market values “difficult” to assess, the report stated. “However, this risk is offset by building of hard CE from amortization of the notes.” Ford plans a target enhancement of 22.9% as the overcollaterization cushion grows from an initial 11.2% level to its target level of 13.7% (each consistent with the target CEs of Ford’s five most recent lease securitizations).
Ford 2016-A will have an initial excess spread of 4.25% a year, up slightly from the 4.18% of 2015-B and 4.16% of 2015-A, according to Fitch.
While the first lease securitization for Ford in 2016, it’s the firms’ second trip to the securitization market. In February it completed $810.8 million Ford Credit Auto Owner Trust 2016-REV1.