CHICAGO—Fitch Ratings assigns the following ratings and Rating Outlooks to the notes issued by Ford Credit Auto Owner Trust 2016-B:

--$288,300,000 class A-1 notes 'F1+sf';

--$275,000,000 class A-2a notes 'AAAsf'; Outlook Stable;

--$185,200,000 class A-2b notes 'AAAsf'; Outlook Stable;

--$382,000,000 class A-3 notes 'AAAsf'; Outlook Stable;

--$120,480,000 class A-4 notes 'AAAsf'; Outlook Stable;

--$39,510,000 class B notes 'AAsf'; Outlook Stable;

--$26,340,000 class C notes 'Asf'; Outlook Stable.

KEY RATING DRIVERS

Stable Credit Quality: The 2016-B pool is consistent with prior deals, with a weighted average (WA) FICO score of 732 and 88.6% new vehicle loans. The pool is geographically diverse and has WA seasoning of approximately 8 months. Loans with terms of 61 months or more declined to 54.2% from 57.1% in 2016-A, but is still the second highest level to date.

Adequate Credit Enhancement Structure: The cash flow distribution is a sequential-pay structure. Initial hard credit enhancement (CE) for the class A notes totals 5.54%, consisting of 5.00% subordination and a 0.54% non-declining reserve. The transaction begins with zero overcollateralization (OC) and builds to a target of 2.00% of the initial adjusted collateral balance plus the excess, if any, of 1.50% of the current balance over the initial reserve amount.

Stable Portfolio/Securitization Performance: Delinquencies and losses on Ford Credit's portfolio and 2009-2015 securitizations are currently at low levels, supported by the state of the U.S. economy and stable used vehicle values, although they are expected to soften over the next year. Fitch's initial base case cumulative net loss is 1.60%.

Stable Corporate Performance: Fitch's current long-term Issuer Default Rating for Ford Credit and its parent company, Ford Motor Company, is 'BBB-' with a Positive Rating Outlook.

Consistent Origination/Underwriting/Servicing: Ford Credit demonstrates adequate abilities as an originator, underwriter and servicer, as evidenced by historical portfolio and securitizations delinquency and loss performance. Fitch deems Ford Credit an adequate servicer to service 2016-B.

Integrity of Legal Structure: The legal structure of the transaction should provide that a bankruptcy of Ford Credit would not impair the timeliness of payments on the securities.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This in turn could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to all classes of 2016-B to increased losses over the life of the transaction. Fitch's analysis found that the notes display some sensitivity to increased defaults and losses. Under Fitch's moderate (1.5x base case loss) scenario the notes would be unlikely to experience any downgrade. However, the notes could experience downgrades of up to two rating categories under Fitch's severe (2.5x base case loss) scenario.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from PricewaterhouseCoopers LLP. The third-party due diligence focused on comparing or re-computing certain information with respect to 125 loans from the statistical data file. Fitch considered this information in its analysis, and the findings did not have an impact on its analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link at the bottom of the related rating action commentary.

Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in the reports titled Ford Credit Auto Owner Trust 2016-B -- Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated March 2, 2016.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 Apr 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878412

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for U.S. Auto Loan ABS (pub. 21 Mar 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878723

Related Research

Ford Credit Auto Owner Trust 2016-B - Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=880311

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1003340

ABS Due Diligence Form 15E 1
https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1003340&flm_nm=15e_1003340_1.pdf

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003340

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Peter Manofsky, +1-312-368-2068
Director
Fitch Ratings, Inc.
70 West Madison
Chicago, IL 60602
or
Secondary Analyst:
Thomas Kaiser, CPA, CFA, +1-312-368-3338
Associate Director
or
Committee Chairperson:
Du Trieu, +1-312-368-2091
Senior Director
or
Media Relations:
Alyssa Castelli, +1-212-908-0540
New York
alyssa.castelli@fitchratings.com
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
New York
elizabeth.fogerty@fitchratings.com