Ford Motor Credit's latest auto loan securitization has a new feature: a revolving period during which new collateral can be added, according to Fitch Ratings.
It comes at a price: Fitch has demanded additional credit enhancement for the notes.
In other respects, the collateral backing the $1.xx billion Ford Credit Auto Owner Trust 2014-RV1 is consistent with Ford’s prior securitizations: the borrowers have a weighted average FICO score of 730. The pool is also geographically diverse with seven months of seasoning, while 42.4% of the pool consists of loans with terms of more than 60 months. However, the ability to add new assets in the future adds an element of risk, even if the new loans have to meet strict criteria, according to Fitch.
Fitch identified as key eligibility parameters those that limit exposure to extended-term loan concentrations, subprime-quality borrowers and concentrations in used vehicles. “Of particular note, certain of the eligibility criteria address multivariate combinations of these attributes, limiting exposure to higher-risk loans such as extended-term loans for used vehicles to higher-risk borrowers,” the report states.
Nevertheless, Ford had to build in additional credit enhancement to earn top ratings. The senior, $1.0 billion of notes, which are rated AAA’ by Fitch, have credit enhancement of 9.5%; by comparison, the senior tranche of Ford’s previous auto loan deal, FCAOT 2014-B, had credit enhancement of just 5.5%.
There is also a $40.54 million tranche of notes with a preliminary AA’ rating and credit enhancement of 5.75%; up from 2.5% for a similar tranche of Ford’s previous deal. A third tranche, also sized at $40.54 million, has a preliminary A’ rating and credit enhancement of 2.0%, up from 0.5% in the previous deal.
Bank of America-Merrill Lynch, Credit Suisse, J.P. Morgan Securities and SMBC Nikko Securities America are the lead underwriters.