Fitch IBCA Rates Ford Credit Auto Owner Trust
21 May 1998
Fitch IBCA Rates Ford Credit Auto Owner Trust $3.0 Billion 1998-B ABS - Fitch IBCA Financial Wire -
NEW YORK, May 21 -- Ford Credit Auto Owner Trust 1998-B's
$750 million class A-1 5.615% asset-backed notes are rated 'F1+' by Fitch
IBCA. In addition, the $1.0 billion class A-2 5.80% asset-backed notes, $785
million class A-3 5.85% notes and $300 million class A-4 5.90% notes are rated
'AAA'. The $105 million class B 6.15% asset-backed notes are rated 'A+' and
the $60 million 6.40% class C 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 class C 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 Motor Credit.
Approximately 70% of the principal balance of the receivables represent
financing for new vehicles. The pool is well diversified geographically with
only two states, Texas (10.5%) and Florida (10.1%), constituting more than 10%
of the pool. As of the cutoff date, the receivables had a weighted average
remaining maturity of approximately 46 months and 10 months of seasoning.
Principal and interest on the notes and certificates is expected to 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
the 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 do not
receive any principal until the class A notes are paid in full, total
enhancement behind the class A notes will increase as a percentage of
outstanding balances 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% reserve account.
The target enhancement is 3.0% and will be made up of the subordination of the
class C certificates and the specified credit enhancement. Similar to the
class A notes, available enhancement for class B will increase as the pool
amortizes, since 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. Initial credit enhancement for the class C certificates is 0.50% and
will increase to 1.0% as overcollateralization builds to its target level.
Under the expected base case scenario, excess spread provides an
additional 2% enhancement in the form of class D subordination (privately
placed). On the closing date the aggregate principal balance of notes and
certificates will be 102% of initial collateral balance. The class D
certificates represent the uncollateralized 2%. During amortization, excess
spread is used to reduce the bond 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 ensures the class D certificates
are collateralized and the specified credit enhancement level achieved.
Furthermore, 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-B pool. For the year
ending Dec. 31, 1997, Ford's net retail portfolio of approximately $35 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 1.64%.