Ford Credit Auto Owner Trust $2B Notes/Certificates 98A Rated by Fitch IBCA - Fitch IBCA Financial Wire -
4 March 1998
Ford Credit Auto Owner Trust $2B Notes/Certificates 98A Rated by Fitch IBCA - Fitch IBCA Financial Wire -
NEW YORK, March 4 -- Ford Credit Auto Owner Trust
$647 million class A-1 5.545% notes are rated 'F1+' by Fitch IBCA. In
addition, the $535 million class A-2 5.60% and the $691.5 million class A-3
5.65% asset-backed notes are rated 'AAA'. The $80.5 million class B
5.95% notes are rated 'A' and the $46 million 6.20% asset backed certificates
are rated 'BBB'.
The ratings on the class A and B notes are based upon their respective
levels of subordination, and the specified credit enhancement amount, which
consists of both funds in the reserve account and overcollateralization. The
rating on the asset-backed certificates is based upon the credit support
provided by the specified credit enhancement amount. All ratings reflect the
transaction's sound legal structure and the high quality of the retail auto
receivables originated and serviced by Ford Credit.
Approximately 70% of the principal balance of the receivables represents
financing for new vehicles. The pool is well diversified geographically with
only two states, Florida (10.71%) and Texas (11.03%), constituting more than
10% of the pool. As of the cutoff date, the receivables had a weighted
average remaining maturity of approximately 48 months and slightly under
8 months of seasoning.
Principal and interest on the notes and certificates will be distributed
monthly. Classes A-1 through A-4 are sequential pay note classes. In
addition, no principal will be distributed to the class B notes until the
class A-4 notes are paid in full, and no principal will be paid to the
certificateholders until the class B notes have been paid in full.
Initial credit enhancement for the class A notes is 6.00% and consists of
5.50% subordination from the class B notes (3.5%) and class C certificates
(2.00%), and the 0.50% initial deposit to the reserve account. After the
closing date, the specified credit enhancement amount, which consists of both
the reserve account and overcollateralization, will be 1.0% thereby bringing
total target class A credit enhancement to 6.5%. Additional credit
enhancement for the class A notes is provided by the transaction's sequential
pay structure. Since the class B notes and class C certificates will not
receive any principal until the class A notes are paid in full, total
enhancement behind the class A notes will increase as the pool amortizes.
Initial credit enhancement for the class B notes is 2.50% and consists of
the 2.00% subordination of the certificates and the 0.50% in the reserve
account. Target enhancement is 3.0% and will be made up of the subordination
of the class C certificates and the specified credit enhancement, as
described above. Similar to the class A notes, available enhancement for
class B will increase as the pool amortizes as the certificates will not
receive any principal until the class B notes are paid in full. Credit
protection for the class C certificates consists of the reserve account and
specified credit enhancement amount. Thus, initial credit enhancement for the
class C certificates will be 0.50%, and will increase to 1.0% as
overcollateralization builds to its target level.
In addition to the enhancement levels for each class of notes and
certificates discussed above, under the expected base case scenario, excess
spread will provide an additional 2% enhancement in the form of subordination
of class D certificates (privately placed). On the closing date the aggregate
principal balance of notes and certificates totaled 102% of initial collateral
balance. The class D certificates represented the uncollateralized 2%.
During amortization, excess spread is used to reduce the bond (all notes and
certificates) balance together with principal collections. Hence, if excess
spread is positive the bonds will amortize more quickly than the collateral.
It is this mechanism that will ensure that the class D certificates will be
collateralized and the specified credit enhancement level achieved.
Furthermore, the 1998-A transaction provides significant structural
protection through a shifting payment priority mechanism. In each
distribution period, a test will be performed to calculate the amount of
desired overcollateralization for the notes versus the actual
overcollateralization. If the desired level of overcollateralization is less
than the actual, then payments of interest to subordinate classes will be
suspended and made available as principal to higher rated classes.
Based on the loss statistics of Ford Credit's prior securitizations, as
well as Ford's U.S. retail portfolio performance, Fitch IBCA expects
excellent performance from the pool of receivables in the 1998-A pool. For
the year ending Dec. 31, 1997, Ford's retail portfolio of approximately
$41 billion had 60+ day delinquencies as a percentage of average contracts
outstanding of 0.43%, and net losses as a percentage of the average net
outstanding principal balance were 1.38%.
SOURCE Fitch IBCA, Inc.