Ford Restarts European Auto Loan ABS Market

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Ford Credit Europe is getting an early start on its funding with a €610.3 million securitization of German auto loans.

Globaldrive Auto Receivables 2016-A B.V will issue €561.5 million of senior class A floating-rate notes with a preliminary ‘Aaa’ rating from Moody’s Investors service. The senior notes benefit from 8% subordination and a reserve fund equivalent to 0.7% of the trust’s assets.

The trust will also issue €18.3 million of class B fixed-rate notes provisionally rated ‘Aa2’ that benefit from 5% subordination as well as the reserve fund.

There is also a €30.5 million tranche of unrated notes.

All of the notes have a legal final maturity of January 2024.

Bank of America Merrill Lynch is the arranger and a lead manager. RBS; BNP Paribas and Credit Agricole are also joint lead managers

They notes are backed by loans granted to individuals (89.1%) and commercial (10.9%) obligors in Germany to finance the purchase of new (80.77%), former demo models (13.31%) and used (5.92%) vehicles.

Nearly three quarters are trade cycle management loans, which provide the borrower with the right to sell the vehicle back to the dealer at the end of the loan term for a pre-defined price, subject to excess mileage or wear and tear adjustments. However, the borrower remains liable for payment of the final balloon installment. The other 25% are fully amortizing installment contracts.

The loans are extremely short term, by U.S. standards; the weighted average life of the portfolio is 2.52 years and the average loan is seasoned by 4.4 months.

There is some interest rate mismatch as 100% of the pool balance comprises fixed rate loans, whereas the class A notes are floating-rate. The mitigate this risk, the trust has entered into a swap agreement with Credit Agricole Corporate Investment Bank.

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