Prime auto ABS

In the pool of 46,070 vehicles in the $1 billion pool or 59,863 in the $1.3 billion pool, none are equipped with diesel engines that were at the center of Volkswagen’s worldwide emissions scandal in 2015.

Deutsche Bank analysts said the newly downgraded junk status for Ford and its captive-finance subsidiary could mean more dependence on securitization to offset expected higher bank financing costs.

Ally Bank, Capital One Auto Finance and BMW Financial Services of North America launched new note offerings, which will add to the year-to-date of $35.2 billions across 32 prior deals.

Captive finance lenders in recent years have been steadily reliant on used cars for asset-backed collateral. That’s not the case with American Honda Finance Corp.

Regional Toyota captive finance lender World Omni has its highest-ever average FICO for a securitization of prime auto-lease receivables. But it also is pooling a portfolio of contracts that have a highly concentrated mix of lease maturities.

S&P stated that as more loans stretch into 72 months or even 84 months as a result of rising new-vehicle prices, auto ABS investors must be mindful of increased credit risks that accompany extended-term loans.

The $1.11 billion Ford Credit Auto Lease Trust (FCALT) 2019-B has 20.2% of the securitization value tied to leases with terms over 36 months – up from 14.4% in FCALT 2019-A. It's the largest percentage for a Ford lease ABS deal since 2014.

For the first time, the captive-finance lender has also opted to add SOFR-based benchmark rate "fallback" plans into one of its deals, which would stand in for one-month Libor should the London interbank offered rate becomes unavailable in 2021.

A DBRS report states rising concentrations of light-duty truck collateral adds risks to vehicle securitization portfolios, but risk may differ among ABS types.

Ford Motor Credit is among the first ABS issuers to backstop the impending demise of U.S.-dollar Libor with a Fed-endorsed SOFR term rate, since a Fed working committee finalized voluntary guidance on a benchmark replacement.