DBRS Assigns Provisional Ratings to Ford Auto Securitization Trust Series 2012-R1 Asset-Backed Notes

DBRS has today assigned the following provisional ratings to Ford Auto Securitization Trust Series 2012-R1 Asset-Backed Notes (the Trust or FAST):

– AAA (sf) to the Asset-Backed Notes, Series 2012-R1, Class A-1 (the Class A-1 Notes)
– AAA (sf) to the Asset-Backed Notes, Series 2012-R1, Class A-2 (the Class A-2 Notes)
– AAA (sf) to the Asset-Backed Notes, Series 2012-R1, Class A-3 (the Class A-3 Notes)
– AA (sf) to the Asset -Backed Notes, Series 2012-R1, Class B (the Class B Notes)
– A (sf) to the Asset -Backed Notes, Series 2012-R1, Class C (the Class C Notes)
– BBB (sf) to the Asset -Backed Notes, Series 2012-R1, Class D (the Class D Notes)

On closing, the Trust will acquire a portfolio of retail conditional sale contracts secured by new and used cars, light trucks and utility vehicles (the Portfolio of Receivables) from Ford Credit Canada Limited (FCCL). The Class A-1 Notes, Class A-2 Notes and Class A-3 Notes (collectively, the Class A Notes) and the Class B Notes, Class C Notes and Class D Notes (collectively, with the Class A Notes, the Notes) are pass-through securities, with monthly payment of interest and principal based on actual cash flows from the Portfolio of Receivables.

Principal on the Notes will be repaid sequentially, with the Class A-1 Notes being paid prior to repayment of any principal on 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. Principal on the Class B Notes will not be repaid until all of the Class A Notes have been repaid in full, while no principal on the Class C Notes will be repaid until all of the principal on the Class B Notes has been repaid in full. Similarly, no repayment of principal will be made to the Series D Notes until all other series of the Notes have been repaid in full. Each of the Class A Notes is provisionally rated AAA (sf), the Class B Notes provisionally rated AA (sf), the Class C Notes provisionally rated A (sf) and the Class D Notes provisionally rated BBB (sf), based on full repayment of the Notes by their respective legal final maturity dates.

The provisional ratings incorporate the following considerations:

(1) The high level of credit enhancement provided by the subordination (7.0% (5.0% on the Closing Date) of the Initial Adjusted Pool Balance at the Closing Date and building as principal on the Senior Notes is repaid), a Reserve Account (1.0% of the Initial Pool Balance) and annual Yield Supplement Overcollateralization Amount (YSOA) of approximately 4.91%, assuming no requirements to pay the 1.0% Replacement Servicer Fees.

(2) The Targeted Overcollateralization Amount, calculated as the sum of the YSOA amount on each payment date and the excess of 1.50% of the Current Pool Balance over 1.0% of the Initial Pool Balance, provides additional protection to the Notes and no cash will be released to the seller until the target is met.

(3) The non-amortizing nature of the subordinated notes result in increasing levels of support for their respective senior notes as the Notes are repaid.

(4) Low and consistent historical credit loss levels of prior FAST transactions and the Seller’s owned and managed portfolio.

(5) Demonstrated experience of FCCL in the origination and servicing of retail auto receivables securitization transactions backed by those assets.

(6) Performance guarantee provided by FCCL’s parent, Ford Motor Credit Company LLC whose ratings are Under Review with Positive Implications by DBRS.

(7) Recovery values are expected to be higher, as compared with our stressed scenarios, in the coming years. The significant reduction in leasing in the Canadian market since 2008, combined with the lengthening of loan contract terms, results in substantially fewer used vehicles entering the market. This should help ensure higher recovery values in the next few years as supply in the used vehicle market will likely be constrained.

Stress tests using assumptions including replacement servicer fees and large increases in delinquency and credit losses indicate that credit enhancement provides sufficient protection to the Notes to warrant the provisional ratings assigned.

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