Ford Automotive China plans to issue RMB2.6 billion ($406 million) of bonds backed by auto loans extended to borrowers in China.
The bonds will be issued from Fuyuan 2015-2 Retail Auto Mortgage Securitization Trust and will be supported by a RMB 267.5 million subordinate tranche.
Moody's Investors Service assigned a preliminary 'Aa3' rating to the senior notes, which are scheduled to mature on Sept. 26, 2017. In addition to the support offered by the subordinate notes, the senior notes also benefit from 12.5% credit enhancement and a liquidity reserve that will comprise an initial cash deposit of 1.2% of the RMB3 billion portfolio.
Moody's noted in the presale report that the senior note rating is constrained by the 'Aa3' local currency country ceiling of China. This captures systemic risks associated with China's political, institutional, legal and economic factors. Moody's will not rate the subordinate tranche.
Loans in the collateral pool all pay a floating-rate of interest pegged to the People's Bank of China benchmark lending rate. The weighted average down payment is equivalent to 37.1% of the total value of the loan. Loans have a weighted average remaining two-year term and are on average 7.82 months seasoned. All of the loans finance new cars.
Ford services the loans and there is no back-up servicer in place. China Merchants Securities, Standard Chartered Bank and BOC International are the underwriters.
Ford has previously completed two deals under the trust. The most recent deal, Fuyuan 2015-1, was completed in February; Fuyuan 2014-1 was the sponsor's debut China auto securitization. Both deals have performed well, according to the Moody's presale.