NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to assign the following ratings and Rating Outlooks to the Ford Auto Securitization Trust (FAST) 2015-R4 Owner Trust notes:
--$236,500,000 class A-1 'F1+sf';
--$155,400,000 class A-2 'AAAsf'; Outlook Stable;
--$108,810,000 class A-3 'AAAsf'; Outlook Stable;
--$15,810,000 class B 'AA+sf'; Outlook Stable;
--$10,540,000 class C 'A+sf'; Outlook Stable;
--$10,540,000 class D 'BBB+sf'; Outlook Stable.
KEY RATING DRIVERS
Strong Credit Quality: The 2015-R4 pool is relatively consistent versus prior 2015 pools (all not rated [NR] by Fitch) and 2014-R2. The weighted average (WA) FICO score is 750, new vehicles total 96.5%, seasoning totals nine months, and the pool is geographically diverse. Longer-term loans (loans with terms exceeding 60 months) increased to 60.4%, the highest level ever seen in a FAST pool and up from 48% in 2014-R2.
Adequate Credit Enhancement: The cash flow distribution is a sequential-pay structure, consistent with prior transactions. Initial hard credit enhancement (CE) for class A notes totals 6.00%, consisting of 7.00% subordination and a 1.00% nondeclining reserve, offset by undercollateralization of 2.00%. Excess spread totals 4.21%, consistent with recent 2015 deals and up from 3.95% in 2014-R2.
Improved Portfolio/Securitization Performance: Delinquencies and losses on FCCL's portfolio and 2009-2014 FAST securitizations have been stable at low historical levels, supported by stable Canadian macroeconomic conditions and used vehicle values.
Consistent Origination/Underwriting/Servicing: FCCL demonstrates good capabilities as originator, underwriter and servicer, as evidenced by historical delinquency and loss performance of its managed portfolio and securitizations. Fitch deems FCCL capable to service 2015-R4.
Stable Corporate Performance: Fitch rates the long-term Issuer Default Rating (IDR) of Ford Motor Credit Company (Ford Credit), the parent of FCCL, 'BBB-' with a Positive Rating Outlook.
Integrity of Legal Structure: The legal structure of the transaction should provide that a bankruptcy of FCCL 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 in turn could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to all classes of 2015-R4 to increased losses over the life of the transaction. Fitch's analysis found that the notes display limited sensitivity to increased defaults and losses, showing no expected impact on the rating of the notes under Fitch's moderate (1.5x base case loss) scenario. The notes could experience a downgrade of two rating categories under Fitch's severe (2.5x base case loss) scenario.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from PWC. The third-party due diligence focused on an extract of 125 retail instalment sale contracts that were selected by Ford Credit Canada and verified for details such as vehicle identification number, contract data, original amount financed, APR etc. In that sample set only two minor inconsistencies were found between the contracts and the data noted in the extract. Fitch considered this information in its analysis and concluded that the findings do not impact our analysis.
A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary. As such, no adjustments were made to Fitch's analysis.
Fitch's analysis of the Representation and Warranties (R&W) of this transaction can be found in: 'Ford Auto Securitization Trust, Series 2015-R4 Appendix'.
These R&W are compared to those of typical R&W for the asset class as detailed in Fitch's June 12, 2015 special report:
--'Representations, Warranties, and Enforcement Mechanisms in the Global Structured Finance Transactions'.
Additional information is available at www.fitchratings.com.
Ford Auto Securitization Trust, Series 2015-R4 (US ABS)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Rating Criteria for U.S. Auto Loan ABS (pub. 10 Apr 2015)
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1