Fitch IBCA To Rate Ford Credit Auto Owner Trust
24 July 1998
Fitch IBCA To Rate Ford Credit Auto Owner Trust 98C Notes/Certs - Fitch IBCA -
NEW YORK, July 23 -- Fitch IBCA expects to rate Ford Credit
Auto Owner Trust 1998-C's $300 million 5.608% class A-1 and
$300 million 5.67% class A-2 notes 'F1+'. In addition, the
$650 million class A-3 5.73%, the $712 million class A-4 5.81%, and the
$200 million class A-5 5.86% asset-backed notes are all expected to be rated
'AAA', the $92 million class B 6.06% asset-backed notes 'A' and the
$46 million 6.30% class C asset-backed certificates 'BBB'. The expected
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 expected
rating on the class C asset-backed certificates is based upon the credit
support provided by the specified credit enhancement amount. All expected
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 69.8% of the principal balance of the receivables represent
financing for new vehicles. The pool is well diversified geographically with
only Texas (10.5%) constituting more than 10% of the pool. As of the cutoff
date, the receivables had a weighted average remaining maturity of
approximately 48.6 months compared to 46 months in the Ford 98-B transaction.
In addition, the 98-C receivables pool has slightly less seasoning than the
98-B pool, equaling 7.7 months compared to 10 months in 98-B.
Principal and interest on the notes and certificates is expected to be
distributed monthly. Classes A-1 through A-5 are sequential pay note
classes. In addition, no principal will be distributed to the class B notes
until the class A-5 notes are paid in full, and no principal will be paid to
the certificate holders until the class B notes have been paid in full.
Initial credit enhancement for the class A notes is 6.50% and consists
of 6.00% subordination from the class B notes (4.00%) 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 7.0%. 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.
In addition to credit enhancement levels for each class of notes and
certificates, 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 represents 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. This mechanism ensures
the class D certificates are collateralized and the specified credit
enhancement level achieved.
Furthermore, the 1998-C 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-C pool. For
the three months ending March 31, 1998, Ford's net retail portfolio of
approximately $37.6 billion had 60+ day delinquencies as a percentage of
average contracts outstanding of 0.46%, and net losses as a percentage of the
average net outstanding principal balance were 1.49%.