Ford Trust Plans Another Offering of German Auto Loan ABS

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Ford Motor Co. is securitizing its second round of German auto loans this year in a €541.7 million pool of both private and commercial borrower receivables tied to significant balloon payments.

Globaldrive Auto Receivables 2016-B B.V. will issue two tranches of notes sized at €498.3 million (Class A) and €16.2 million (Class B), each with a floating rate structure. Moody’s Investors Service has assigned a provisional ‘Aaa’ rating to the Class A notes and ‘Aa2’ to the ‘B’ notes.

A subordinate Class C bonds issuance of €27.2 million is to be retained by the issuer, and will not be rated.

The Class A and B rated notes structures mature in 2014 and carry credit enhancement of 8.71% and 5.71%, respectively. A reserve fund equal to 0.75% of the rated notes is included, but is only available for liquidity purposes during the tenor of the transaction.  

The 32,773 loans in the pool were issued by Ford’s German subsidiary FCE (Ford Credit) Bank, which also is the servicer. A large majority of the loans (81.2%) were for new vehicles.

This is the 21st issuance by Globaldrive, which issued its 2016-A transaction in January. The new deal carries similar ratings to recent pools of loans securitized through the trust. As with prior issuances, the pool is a static structure that will not have a revolving period to augment with additional collateral.

The portfolio credit enhancement is 9.5%, according to Moody’s, which has set the projected accumulative default rate to 2.4%.

A large bulk of the loans (81.42%) of the loans contains balloon payments that average 44.2% of original principal. However, the balloon notes are tied to contracts that permit borrowers to sell the vehicle back to Ford franchised dealers at the end of a nearly four-year loan term, minus the balance of the balloon payment.  

The amount of balloon payments pushes 40% of the portfolio’s principal amortization schedule past December 2019 – creating a commingling risk factor that Globaldrive mitigates with both an initial commingling reserve fund and post-December 2019 commingling reserve allocations.

Due to the abundance of balloon notes that carry shorter terms, the weighted average remaining terms of just 42.21 months after just 4.66 months of seasoning. The fully amortizing standard loans have terms between 36 and 60 months, with a maximum 72 month maturity.

Banca IMI, Bank of America Merrill Lynch, BNP Paribas, and Credit Agricole were joint arrangers and lead managers on the transaction.  

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