Ford Credit Auto Owner Trust 1999-A Expect 'AAA' Rating
15 January 1999
Ford Credit Auto Owner Trust 1999-A Expect 'AAA' Rating by Fitch IBCA - Fitch IBCA -
NEW YORK, Jan. 14 -- Fitch IBCA expects to rate the
Ford Credit Auto Owner Trust 1999-A as follows:
-- $250,000,000 class A-1 5.01% asset-backed notes, 'F1+'
-- $296,000,000 class A-2 5.089% asset-backed notes, 'F1+'
-- $495,000,000 class A-3 5.31% asset-backed notes, 'AAA'
-- $313,767,000 class A-4 5.31% asset-backed notes, 'AAA'
-- $250,000,000 class A-5 5.38% asset-backed notes, 'AAA'
-- $250,000,000 class A-6 5.41% asset-backed notes, 'AAA'
-- $68,695,000 class B 5.79% asset-backed notes, 'A'
-- $39,254,000 class C 6.52% asset-backed certificates, 'BBB+'
The expected ratings on the class A and B notes are based on their
respective levels of subordination and the specified credit enhancement amount
(explained below), which consists of funds in the reserve account,
overcollateralization, and the yield supplement overcollateralization amount
(also explained below). The expected rating on the class C asset-backed
certificates is based on the credit support provided by subordination and 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.
The 1999-A transaction includes a new structural feature, the yield
supplement overcollateralization amount (YSOC), designed to compensate for
receivables in the pool whose interest rates are below 9%. The YSOC is a
predetermined dollar amount calculated for each distribution date as the sum
of the excess, if any, of the present value of the scheduled payments for each
receivable discounted at its respective annual percentage rate (APR) over the
present value of the scheduled payments for each receivable discounted at 9%.
The YSOC is calculated assuming no defaults and no prepayments. The YSOC
amount is subtracted from the pool balance in calculating the first priority,
second priority, and regular principal distribution amounts, resulting in
additional application of excess interest to turbo the class of securities
then entitled to receive principal payments. Additionally, the bond balances
are based off the collateral balance less the YSOC resulting in initial
overcollateralization of 0.40%.
Initial credit enhancement for the class A notes is 8.25% and consists of
7.35% subordination from the class B notes (3.43%), the class C certificates
(1.96%) and the class D certificates (1.96%), the 0.50% initial deposit to the
reserve account, and initial overcollateralization of 0.40%. After the
closing date, the specified credit enhancement amount, which consists of both
the reserve account and overcollateralization, will increase due to the
application of excess spread. 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 4.82% and consists of
the 1.96% subordination of the class C certificates, the 1.96% subordination
of the class D certificates, the 0.50% reserve account, and initial
overcollateralization of 0.40%. 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, initially 2.86%,
consists of the subordination of the class D certificates, the reserve
account, and initial overcollateralization.
On the closing date, the aggregate principal balance of the notes and
certificates will be 102% of the initial pool balance less the YSOC. In
contrast to all Ford transactions since the 1997-B transaction, the class D
certificates will be fully collateralized at closing as a result of the YSOC.
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 ensures that the class D certificates
remain collateralized and the specified credit enhancement level is achieved.
Furthermore, the 1999-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.
Approximately 77.5% of the principal balance of the receivables represent
financing for new vehicles, up from 69.8% in the 1998-C transaction. The pool
is well diversified geographically with only Texas (12.5%) constituting more
than 10% of the pool. Other major states with concentrations over 5% include
California (8.89%), Florida (8.09%), and Illinois (5.75%). As of the cutoff
date, the receivables had a weighted average remaining maturity of
approximately 47.3 months compared to 48.6 and 46 months in the Ford 98-C and
98-B transactions, respectively. The receivables pool has a weighted average
seasoning of 7.9 months, up slightly from 7.7 months in the Ford 98-C
transaction. The weighted average APR on the pool (8.93%) is lower than
previous Ford transactions, due to Ford's recent subvention strategy.
Principal and interest on the notes and certificates is expected to be
distributed monthly. Classes A-1 through A-6 are sequential pay note classes.
In addition, no principal will be distributed to the class B notes until the
class A-6 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.
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 1999-A pool. For the nine
months ending Sept. 30, 1998, Ford's net retail portfolio of approximately
$40.035 billion had 60+ day delinquencies as a percentage of average contracts
outstanding of 0.41%, and net losses as a percentage of the average net
outstanding principal balance were 1.25%.