Ford Motor Credit has launched an offering of $810 million of securities backed by prime retail auto loans.
The deal, dubbed Ford Credit Auto Owner Trust 2016-REV2, will issue three tranches of notes with a legal final maturity of December 2017. Moody’s Investors Service has assigned a preliminary ‘AAA’ rating to the senior, $750 million tranche, which benefits from credit enhancement of 9.5%. It also assigned an ‘Aa1’ to $34.01 million tranche with 5.75% credit enhancement and an ‘A1’ to another $34.01 million tranche with 2% credit enhancement.
Bank of America Merrill Lynch, Citigroup, HSBC and Lloyds Securities are the lead underwriters.
Among the strengths of the deal, according to Moody’s, is the fact that a large portion of contracts with interest rates that are low because they have been subvented, or subsidized, in order to attract high quality customers who might otherwise have purchase their vehicle with cash. The weighted average APR is 2.95%. Moody’s expects the presence of these contracts to have a positive impact on overall pool performance.
Loans in the pool have an average FICO of score of 732, an original term of 65 months, and eight months of seasoning.
New vehicles back 89% of the loans and used vehicles back 11% of the loans.
Among the credit challenges is the fact that the transaction has a revolving period of up to five years before amortization begins. During this time new loans may be added to the pool, which could cause changes in pool quality and performance.
Also, two forms of credit enhancement in the deal have weakened compared with the previous deal from this series, completed in 2015: the pool composition test and floor tests.