DBRS Confirms Ford Auto Securitization Trust 2010-R3

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 issued by Ford Auto Securitization Trust (the Trust):

– AAA (sf) on the Asset-Backed Notes, Series 2010-R3, Class A-1
– AAA (sf) on the Asset-Backed Notes, Series 2010-R3, Class A-2
– AAA (sf) on the Asset-Backed Notes, Series 2010-R3, Class A-3 (collectively with the Class A-1 and Class A-2, the Class A Notes)
– AA (high) (sf) on the Asset-Backed Notes, Series 2010-R3, Class B
– A (high) (sf) on the Asset-Backed Notes, Series 2010-R3, Class C
– BBB (high) (sf) on the Asset-Backed Notes, Series 2010-R3, Class D (collectively, with the Class A Notes, the Class B and the Class C, the Notes)

The ratings are based on the following factors:

(1) High levels of credit enhancement are available to protect the Notes. Credit protection is provided to all the Notes by a non-amortizing cash reserve account that was seeded with 1.0% of the Initial Pool Balance and that represents 1.4% of the current outstanding amount of the Notes as of April 2011.

(2) In addition, the Class A Notes have preferential access to collections arising from the subordination of the Class B, Class C and Class D Notes, equivalent to 8.7% of the outstanding amount of the Notes as of April 2011. Class B has preferential access to collection, equivalent to 5.0% of the Notes, and Class C, to 2.5%.

(3) Front-end risk to the repayment of the Notes was addressed in this transaction, with the inclusion of a requirement to maintain an overcollateralization amount calculated as the addition of the excess, if any, of 1.5% of the current pool balance over 1.0% of the Initial Pool Balance. As of April 2011, the overcollateralization represents 0.3% of the current outstanding amount of the Notes.

(4) Total credit enhancement available to the Class A, Class B, Class C and Class D notes, have increased to 10.4%, 6.7%, 4.2% and 1.7%, respectively, measured as a percentage of the aggregate outstanding notes balance as of April 2011.

(5) As the Initial Pool Balance was sold to the Trust at a discounted value, the yield supplement overcollateralization amount created contributes to the generation of excess spread of approximately 6.0% on an annualized basis to support repayment of the Notes, assuming no losses or requirements to pay the 1.0% replacement servicer fee.

(6) The collateral has performed well since inception and continues to perform within expectations. The average delinquency ratio since the onset of the transaction has been 43 bps, while the annualized loss ratio has been 17 bps. Cumulative losses as of April 2011 amount to 10 bps of the Initial Pool Balance.

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

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

(9) A high number of loans are greater than 60 months, resulting in longer periods of exposure to potential losses.

The net proceeds of the Notes were applied by the Trust to finance the purchase of a pool of retail conditional sale contracts secured by new and used cars, light trucks and utility vehicles (the Portfolio of Receivables) 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 Receivables. 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. No amounts of principal will be applied to the Class B, Class C and Class D Notes until the Class A Notes have been repaid in full. Principal on the Class B Notes will be repaid prior to any principal repayments on the Class C Notes or Class D Notes and the Class C Notes must be repaid in full prior to any repayment of principal on the Class D Notes.

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 Stable trends), 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 expenses.

Upon bankruptcy or insolvency of the Trust, the Notes will be accelerated automatically. Upon any other event of default, the Notes may be accelerated by the holders of a majority of the note balance of the controlling class. If the Notes are accelerated after an event of default, the priority of payments will change and the Trust will not pay interest on Notes that are not part of the controlling class until both interest and principal on the controlling class have been paid in full.

The performance and characteristics of the Portfolio of Receivables 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.