DBRS Confirms Ford Auto Securitization Trust 2009-R1 at AAA (sf)

As part of DBRS’s continued effort to provide market participants with updates on an annual basis, DBRS has today confirmed the ratings on the following notes (collectively, the Notes) issued by Ford Auto Securitization Trust (the Trust):

– AAA (sf) on the Asset-Backed Notes, Series 2009-R1, Class A-2
– AAA (sf) on the Asset-Backed Notes, Series 2009-R1, Class A-3

The ratings are based on the following factors:

(1) High levels of credit enhancement are available to protect the Notes. Credit protection to the Notes is provided by overcollateralization and cash reserve amounts. The initial overcollateralization for the Notes was equal to 5.0% of the Initial Adjusted Pool Balance (Initial Pool Balance discounted by the yield supplement overcollateralization amount) and was required to increase to 7% of the Initial Adjusted Pool Balance plus the excess, if any, of 1.5% of the current pool balance over 1.0% of the Initial Pool Balance. Since May 2010, the overcollateralization has been maintained at 7% of the Initial Adjusted Pool Balance, which is equivalent to 20.6% of the outstanding balance of the Notes as of April 2011.

(2) Additional credit protection to the Notes is provided by a non-amortizing reserve account that was seeded at the onset of the transaction with an amount equal to $7,273,084.59, which is equivalent to 3.4% of the outstanding balance of the Notes as of April 2011. Total current credit enhancement available to the Notes stands at 24.0%.

(3) The discounting of the receivables provides for excess spread of approximately 5.7% annually (absent losses or replacement servicer fees).

(4) The delinquency rate has been 66 basis points (bps) on average since inception and the annualized loss rate has been 47 bps. To date, cumulative losses amount to 59 bps of the Initial Pool Balance.

(5) The demonstrated experience of Ford Credit Canada Limited (FCCL) in the origination and servicing of retail auto loan securitization transactions backed by those assets.

(6) The performance guarantee provided by FCCL’s parent, Ford Motor Credit Company LLC.

(7) A high percentage of collateral that is sensitive to rising gas prices in the portfolio, which could affect the recovery values on defaulted assets.

The net proceeds of the Notes were applied by the Trust to finance the purchase of a pool of retail car and light truck loans (the Portfolio of Loans) acquired by FCCL. As some of the loans were originated under special programs that provided for low-rate financing, the average annual percentage rate of the Portfolio of Loans was not sufficient to cover the funding costs of the Notes issued by the Trust. In order to provide for interest spread, the purchase price paid for the loans by the Trust was based on the net discounted book value.

The Notes pay a fixed rate of interest with monthly repayment of interest and principal based on actual cash flows from the Portfolio of Loans. Principal on the Notes is being paid sequentially, with the Class A-1 Notes being paid prior to repayment of the Class A-2 Notes and the Class A-2 Notes being paid prior to repayment of any principal on the Class A-3 Notes. The Class A-1 Notes were fully repaid in March 2011.

As the Portfolio of Loans receives blended monthly payments of principal and interest on a fixed-rate basis, there is currently no requirement to hedge the cash flows for interest rate mismatch since the Notes offered also pay a fixed rate of interest.

Based on the current ratings of FCCL (BB and R-4, with a Stable trend), the structure of cash collections includes a mechanism to limit the commingling risk of the servicer that, broadly, requires all amounts collected to be remitted within two business days. Recoveries from charged-off receivables are remitted on a monthly basis net of auction proceeds.

If an event of default with respect to a series occurs other than because of bankruptcy or insolvency of the Trust, the indenture trustee or a majority of the controlling class for that series may accelerate the notes of the series and declare them to be immediately due and payable. If an event of default with respect to a series occurs because of bankruptcy or insolvency of the Trust, the notes of that series will be accelerated automatically. After an event of default, principal due will be paid sequentially by class and interest due on the notes will be paid pro rata, based on the principal amount of the notes as of the end of the preceding payment date.

The performance and characteristics of the Portfolio of Loans and the Notes are available and updated each month in the Monthly Canadian ABS Report (see Related Research).

For more detailed information on the transaction structure, please refer to the rating reports of the Trust at www.dbrs.com.

Notes:
The applicable methodology is Rating Canadian Auto Loan Securitization, which is available on our website under Methodologies.