NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns the following ratings to the notes issued by Ford Credit Auto Owner Trust 2014-C:
--$381,500,000 class A-1 'F1+sf';
--$508,000,000 class A-2 'AAAsf'; Outlook Stable;
--$504,400,000 class A-3 'AAAsf'; Outlook Stable;
--$105,510,000 class A-4 'AAAsf'; Outlook Stable;
--$47,350,000 class B 'AA+sf'; Outlook Stable;
--$31,570,000 class C 'A+sf'; Outlook Stable;
--$31,570,000 class D 'NRsf'.
Fitch's presale report is available to all investors at 'www.fitchratings.com' or by clicking on the above link.
KEY RATING DRIVERS
Stable Credit Quality: The 2014-C pool is consistent with prior deals, with a WA FICO score of 731 and 89.4% new vehicle contracts. The pool is geographically diverse with WA seasoning of nine months, while 43.9% of the pool consists of loans with terms of more than 60 months.
Adequate Credit Enhancement Structure: The cash flow distribution is a sequential-pay structure. Initial hard credit enhancement (CE) for the class A notes totals 5.50%, consisting of 7.00% subordination and a 0.50% non-declining reserve offset by under-collateralization of 2.00%, on an adjusted pool basis.
Stable Portfolio/Securitization Performance: Delinquencies and losses on Ford Credit's portfolio and 2009 - 2013 securitizations are currently at low levels, supported by the improving U.S. economy and stable used vehicle values, although they are expected to soften over the next year.
Positive Corporate Performance: Fitch's current Long-Term (LT) Issuer Default Ratings (IDRs) for Ford Motor Company (Ford), parent of Ford Credit, and Ford Credit is 'BBB-' with a Positive Rating Outlook.
Slow Economic Recovery: A slower recovery and potential for volatility could affect delinquencies and losses. Fitch's analysis accounts for this risk by including poorer performing vintages from the recent recession in the base case loss analysis.
Consistent Origination/Underwriting/Servicing: Ford Credit demonstrates adequate abilities as originator, underwriter and servicer, as evidenced by historical portfolio and securitizations' delinquency and loss performance. Fitch deems Ford Credit an adequate servicer to service 2014-C.
Integrity of Legal Structure: The legal structure of the transaction should provide that a bankruptcy of Ford Credit would not impair the timeliness of payments on the securities.
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case. This could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to all classes of Ford Credit Auto Owner Trust 2014-C to increased losses over the life of the transaction. Fitch's analysis found that the class B and C notes display some sensitivity to increased defaults and losses, showing potential downgrades of up to one category under Fitch's moderate (1.5x base case loss) scenario. All classes of notes could experience downgrades of up to two rating categories under Fitch's severe (2.5x base case loss) scenario.
Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'Ford Credit Auto Owner Trust 2014-C - Appendix'. This R&W is compared to those of typical R&W for the asset class as detailed in Fitch's April 17, 2012 special report, 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions'.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (August 2014);
--'Rating Criteria for U.S. Auto Loan ABS' (April 2014);
--'Structured Finance Tranche Thickness Metrics' (July 2011);
--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance' (April 17, 2012);
--'Ford Credit Auto Owner Trust 2014-C (US ABS)' (November 2014).
--'Ford Credit Auto Owner Trust 2014-C - Appendix' (November 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Rating Criteria for U.S. Auto Loan ABS
Structured Finance Tranche Thickness Metrics
Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions
Ford Credit Auto Owner Trust 2014-C (US ABS)
Ford Credit Auto Owner Trust 2014-C -- Appendix