Ford Cred Auto Owner Trust 1999-C Expct `AAA' Rtg by Fitch IBCA
21 July 1999
Ford Cred Auto Owner Trust 1999-C Expct `AAA' Rtg by Fitch IBCA
NEW YORK--July 21, 1999--Fitch IBCA expects to rate the Ford Credit Auto Owner Trust 1999-C as follows:--$250,000,000 class A-1 5.149% asset-backed notes, 'F1+' --$588,000,000 class A-2 5.351% asset-backed notes, 'F1+' --$990,000,000 class A-3 5.77% asset-backed notes, 'AAA' --$627,366,000 class A-4 6.08% asset-backed notes, 'AAA' --$250,000,000 class A-5 6.20% asset-backed notes, 'AAA' --$250,000,000 class A-6 6.27% asset-backed notes, 'AAA' --$109,457,000 class B 6.42% asset-backed notes, 'A' --$62,546,000 class C 6.75% asset-backed certificates, 'BBB+'.
The expected ratings on the class A and B notes are based on their respective levels of subordination, the specified credit enhancement amount (explained below), which consists of funds in the reserve account and overcollateralization, and the yield supplement overcollateralization amount (YSOC, also explained below). The expected rating on the class C asset-backed certificates is based on the credit support provided by subordination, the specified credit enhancement amount, and the YSOC. 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 Co.
The 1999-C transaction incorporates the YSOC feature, which compensates for receivables in the pool whose interest rates are below 9.5%. 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 APR over the present value of the scheduled payments for each receivable discounted at 9.5%. The YSOC is subtracted from the pool balance in calculating bond balances and the first priority, second priority, and regular principal distribution amounts, resulting in the creation of 'synthetic' interest that enhances the receivables' yield and is available to cover losses and turbo the class of securities then entitled to receive principal payments.
Initial credit enhancement for the class A notes as a percentage of collateral less YSOC is 6.0% and consists of 5.5% subordination from the class B notes (3.5%) and the class C certificates (2.0%), and the 0.5% initial deposit to the reserve account. After the closing date, the specified credit enhancement amount, which consists of both the reserve account and overcollateralization, is 1.0%, thereby bringing the total target class A credit enhancement to 6.5%. Initial credit enhancement for the class B notes as a percentage of collateral minus YSOC is 2.5% and consists of the 2.0% subordination of the class C certificates and the 0.5% reserve account. The target enhancement is 3.0% and is made up of the subordination of the class C certificates and the specified credit enhancement, as described above. Credit protection for the class C certificates, initially 0.5%, consists of the reserve account and the specified credit enhancement amount, and increases to 1.0% as overcollateralization builds to its target level.
In addition to credit enhancement levels for each class of notes and certificates discussed above, under the expected base case scenario excess spread provides an additional 2% enhancement in the form of class D (privately placed) subordination. On the closing date, the aggregate principal balance of the notes and certificates will be 102% of the initial pool balance less the YSOC. The class D certificates represent the uncollateralized 2%. During amortization, both excess spread and principal collections are available to reduce the bond (all notes and certificates) balance. 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 are collateralized and the specified credit enhancement level is achieved.
Furthermore, the 1999-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.
Approximately 70% of the principal balance of the receivables represent financing for new vehicles, the same proportion as in 1999-B. The pool is well diversified geographically with concentrations in Texas (10.6%), California (10.4%), Florida (7.8%), and Illinois (5.7%). No other state accounts for more than 5% of the pool. As of the cutoff date, the receivables had a weighted average remaining maturity of approximately 45.1 months compared to 44.7 and 47.3 months in the Ford 99-B and 99-A transactions, respectively. The receivables pool has a weighted average seasoning of 9.5 months, down slightly from 9.8 months in Ford 99-B transaction. The weighted average APR on the pool (7.19%) is similar to the 99-B pool and lower than previous Ford transactions, due to Ford's 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 certificateholders until the class B notes have been paid in full. Fitch IBCA's ratings address the likelihood of full and timely payments of interest and principal by the stated final maturity date of each class.
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-C pool. For the three months ended March 31, 1999, Ford's net retail portfolio of approximately $48.579 billion had 60+ day delinquencies as a percentage of average contracts outstanding of 0.40%, and net losses as a percentage of the average net outstanding principal balance were 1.06%.