Ford Credit Auto Owner Trust 2000-A Expected `AAA' By Fitch IBCA
16 March 2000
Ford Credit Auto Owner Trust 2000-A Expected `AAA' By Fitch IBCA
NEW YORK--March 16, 2000--Fitch IBCA expects to rate Ford Credit Auto Owner Trust 2000-A as follows:--$155,000,000 class A-1 6.035% asset-backed notes, `F1+',
--$377,000,000 class A-2 6.217% asset-backed notes, `F1+',
--$1,000,000,000 class A-3 6.82% asset-backed notes, `AAA',
--$975,000,000 class A-4 7.09% asset-backed notes, `AAA',
--$171,189,000 class A-5 7.19% asset-backed notes, `AAA',
--$99,200,000 class B 7.37% asset-backed notes, `A',
--$56,690,000 class C 7.75% asset-backed certificates, `BBB+'.
The expected ratings on the class A and B notes are based upon 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 upon the credit support provided by subordination, the specified credit enhancement amount, and the YSOC. All expected ratings reflect the transaction's sound legal structure, the high quality of the retail auto receivables originated by Ford Motor Credit Company (Ford Credit) and PRIMUS Financial Services, Inc. (PRIMUS), and the servicing provided by Ford Credit.
The 2000-A transaction represents the second inclusion of PRIMUS collateral (approximately 12%) in a Ford Credit retail auto securitization. As of Aug. 1, 1999, PRIMUS became a division of Ford Credit. PRIMUS operates as a `non-captive' captive finance company for certain auto manufacturers, including Mazda, Suzuki, Subaru, Jaguar, and Aston Martin. In addition, PRIMUS provides retail and lease financing under its own label to other manufacturer's dealers, competing directly with other captive finance companies and regional banks. Essentially, PRIMUS follows the same policies and procedures as Ford Credit in terms of underwriting and servicing. In addition to conducting an originator/servicer review in June 1999, Fitch IBCA analyzed six years of gross static pool loss data for the PRIMUS collateral and determined a base case default assumption for the PRIMUS portion of the transaction. Vehicles underlying the PRIMUS collateral depreciate at rates substantially similar to Ford vehicles, and as such, recovery assumptions were similar to Ford Credit's. After stressing the combined collateral pool in a manner consistent with the various rating levels, Fitch IBCA concluded that the inclusion of PRIMUS collateral would not significantly affect the performance of the 2000-A transaction, and credit enhancement levels remain the same.
As in the previous four securitizations, the 2000-A transaction incorporates the YSOC feature to compensate for receivables in the pool whose interest rates are below a given rate (for this transaction 10%). 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' excess spread that enhances the receivables' yield and is available to cover losses and turbo the class of securities then entitled to receive principal payments.
Initial collateralization for the class A notes as a percentage of collateral balance 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 for all classes of notes and certificates, 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 collateralization for the class B notes as a percentage of collateral balance 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 collateralization 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 2000-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 PRIMUS' and Ford's U.S. retail portfolio performance, Fitch IBCA expects excellent performance from the pool of receivables in the 2000-A pool. For the year ended Dec. 31, 1999, Ford's net retail portfolio of approximately $66.928 billion had 60+ day delinquencies as a percentage of average contracts outstanding of 0.32%, and net losses as a percentage of the average net outstanding principal balance were 1.07%.