DBRS Confirms Ratings of Ford Auto Securitization Trust 2017-R5

DBRS Limited (DBRS) confirmed the ratings on the following notes issued by Ford Auto Securitization Trust 2017-R5 (the Trust) as part of DBRS’s continued effort to provide market participants with updates on an annual basis:

-- Asset-Backed Notes, Series 2017-R5, Class A-1 (the Class A-1 Notes) at AAA (sf)
-- Asset-Backed Notes, Series 2017-R5, Class A-2 (the Class A-2 Notes) at AAA (sf)
-- Asset-Backed Notes, Series 2017-R5, Class A-3 (together with the Class A-1 Notes and the Class A-2 Notes, the Class A Notes) at AAA (sf)
-- Asset-Backed Notes, Series 2017-R5, Class B (the Class B Notes; together with the Class A Notes, the Rated Notes) at AA (high) (sf)

The Asset-Backed Notes, Series 2017-R5, Class C (the Class C Notes; together with the Rated Notes, the Notes) are unrated.

The ratings are based on the following factors:

(1) High levels of credit enhancement are available to protect all the Notes. Credit protection to the Notes is provided by a non-amortizing cash reserve account, subordination and overcollateralization. The cash reserve account was seeded at inception with 1.0% of the Initial Pool Balance and represents 1.6% of the Notes outstanding as at August 2018. Subordination of the Class B and Class C Notes provides the Class A Notes with preferential access to collections, equivalent to 6.8% of the outstanding amount of the Notes as at August 2018. Subordination of the Class C Notes provides the Class B Notes with preferential access to collections, equivalent to 2.7% of the outstanding amount of the Notes. The overcollateralization amount, excluding the Yield Supplement Overcollateralization Amount (YSOA), reached its targeted level in Month 6 and currently represents 2.9% of the outstanding amount of the Notes. Total credit enhancement levels available to the Class A, Class B and Class C Notes have increased to 11.3%, 7.2% and 4.5%, respectively, measured as a percentage of the outstanding Notes balance as at August 2018.

(2) Front-end risk to the repayment of the Notes was addressed with the inclusion of a requirement to maintain an overcollateralization amount calculated as the excess, if any, of 1.5% of the current pool balance over 1.0% of the Initial Pool Balance.

(3) As the Initial Pool Balances were sold to the Trust at discounted values, the YSOAs created contribute to the generation of excess spread that is available to support repayment of the Notes. Current excess spread available, net of losses, is approximately 6.3%.

(4) To date, cumulative losses are below DBRS’s expectations set at the time of the initial ratings, amounting to 11 basis points.

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

(6) A performance guarantee is provided by FCCL’s parent, Ford Motor Credit Company LLC (rated BBB with a Stable trend by DBRS).

DBRS monitors the performance of each transaction to identify any deviation from DBRS’s expectation at issuance and to ensure the ratings remain appropriate. The review is predicated upon the timely receipt of performance information from the related providers. The performance and characteristics of each publicly rated auto loan portfolio, including the Notes, are available and updated each month in the Monthly Canadian ABS Report, which is available at www.dbrs.com.

Notes:
The principal methodologies are Master Canadian Structured Finance Surveillance Methodology (May 2018), Rating Canadian Auto Retail Loan and Lease Securitizations (October 2018) and Legal Criteria for Canadian Structured Finance (July 2018), which can be found on dbrs.com under Methodologies.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.