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Ford's next prime auto ABS has a five-year revolving period

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Ford Motor Credit is returning to a five-year revolving period for its next prime auto loan securitization, the $824.2 million Ford Credit Auto Owner Trust (FCAOT) 2018-REV2.

The change comes after a one-time expansion to a seven-year window in an unusually large $2.2 billion issuance In January. That broke from the standard five-year revolving period from previous REV deals allowing the Ford trust to add new loan collateral during each deal’s pre-amortization time frame.

Reverting to a five-year revolving period not only reduces the waiting time for noteholders to receive their first principal payments, but also allowed Ford Motor Credit to step down credit enhancement to 9.5% from 10.5% for the REV 2018-1 transaction.

The new deal is secured by $1.64 billion in aggregate loan balances across 60,397 accounts with an average balance of $27,192.

The revolving shelf is one of two prime auto-loan platforms Ford Motor Credit sponsors to securitize captive-finance originations from Ford dealers. In recent years, Ford has averaged two deals annually with revolving pools.

The capital stack for REV 2018-2 includes a $750 million Class A tranche with preliminary triple-A ratings from Moody’s Investors Service and Fitch Ratings.

Citigroup is the lead structuring agent and joint bookrunner.

The credit quality of the transaction is similar to both prior closed-end FCAOT deals and the alternative revolving pools of prime loans, with a weighted average FICO of 737.

But the 88% concentration of new vehicles is down from that of previous REV deals, as is the 7.8 months average seasoning; it was 8.1 months in REV 2018-1 and 10.3 months in REV 2017-2.

Moody’s expected net losses to reach 1.75% over the life of the deal, unchanged from the prior deal. Fitch has established a 1.9% base-case loss proxy on the initial pool.

The deal's concentration of “super prime” borrowers with FICO scores greater than 749 is 37.4%, which is consistent with REV transactions and amortizing FCAOT transactions. Borrowers with FICO scores less than 650 is 14.4%, which is at the bottom of range compared to prior REV transactions.

The new REV transaction has a lower than normal passenger-car pool concentration of 16.05%, compared to 18.27% earlier this year and as high as 26.21% in 2014 – reflecting diminished sales in favor of light-duty trucks, SUVs and cross-overs.

The largest model segments in the pool are the F-150 pickup truck (24.5%), the Explorer SUV (11.9%) and F-250 truck (10.37%). For the first time in a REV transaction, a passenger vehicle is not among the top five models.

Ford Credit’s managed portfolio increased to $44.4 billion through year-end 2017, reflecting rising originations from increased vehicle sales over the past year. Delinquencies were down to 1.3% from 1.63%, and has decreased year-over-year since 2012.

Repossessions have risen to 1.29%, and have trended higher through the first quarter to 1.41% from 1.32% a year earlier.

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Prime auto ABS Ford Motor Credit