DBRS Confirms Ratings on Ford Auto Securitization Trust 2018-A

DBRS Limited (DBRS) confirmed the ratings on the following notes issued by Ford Auto Securitization Trust 2018-A (the Trust) as part of DBRS’s continued effort to provide market participants with updates on an annual basis:

-- Asset-Backed Notes, Series 2018-A, Class A-1 (the Class A-1 Notes) at AAA (sf)
-- Asset-Backed Notes, Series 2018-A, Class A-2 (the Class A-2 Notes) at AAA (sf)
-- Asset-Backed Notes, Series 2018-A, Class A-3 (the Class A-3 Notes; together with the Class A-1 Notes and the Class A-2 Notes, the Class A Notes) at AAA (sf)

The Asset-Backed Notes, Series 2018-A, Class B and Class C are unrated (the Class B Notes and the Class C Notes; together with the Class A, the Notes)

The ratings are based on the following factors:

(1) High levels of credit enhancement are available to protect all of 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 December 2018. Subordination of the Class B Notes and the Class C Notes provides the Class A Notes with preferential access to collections, equivalent to 6.8% of the outstanding amount of the Notes. The overcollateralization amount, excluding the Yield Supplement Overcollateralization Amount, reached its target level in month six 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 11.2%, 7.2% and 4.5% respectively, measured as a percentage of the outstanding Notes balance as at December 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 2.0% 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.

(3) As the Initial Pool Balances were sold to the Trust at discounted values, the Yield Supplement Overcollateralization Amounts 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 5.7%.

(4) To date, cumulative losses are below DBRS’s expectations set at the time of the initial rating, amounting to 13 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.

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 and the Notes are available and updated each month in the Monthly Canadian ABS Report, which is available at www.dbrs.com.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Master Canadian Structured Finance Surveillance Methodology, which can be found on dbrs.com under Methodologies & Criteria.

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.
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