July 22 (The following statement was released by the rating agency)
Fitch Ratings expects to assign the following ratings to the notes issued by Ford Credit Auto Owner Trust 2013-C:
--$315,000,000 class A-1 'F1+sf';
--$414,000,000 class A-2 'AAAsf'; Outlook Stable;
--$420,200,000 class A-3 'AAAsf'; Outlook Stable;
--$100,930,000 class A-4 'AAAsf'; Outlook Stable;
--$39,480,000 class B 'AAsf'; Outlook Stable;
--$26,320,000 class C 'Asf'; Outlook Stable;
--$26,320,000 class D 'BBBsf'; Outlook Stable.
KEY RATING DRIVERS
Stable Credit Quality: The 2013-C pool is relatively consistent with prior deals. The weighted average (WA) FICO score is 723 with 87.30% new vehicles, while the pool is geographically diverse with 6.9 months of seasoning, and 41.32% of the retail contracts have loan terms of more than 60 months.
Adequate Credit Enhancement Structure: The cash flow distribution is a sequential-pay structure, consistent with prior transactions. Initial hard credit enhancement for the class A notes totals 5.50%, consisting of 7.00% subordination and a 0.50% nondeclining reserve offset by under-collateralization of 2.00% on an adjusted pool basis.
Improved Portfolio/Securitization Performance: Losses on Ford Credit's portfolio and 2009-2012 FCAOT securitizations have declined supported by the improving, albeit volatile, U.S. economy, and healthy used vehicle values resulting in higher recovery rates.
Positive Corporate Performance: Fitch currently rates the long-term Issuer Default Rating (IDR) of Ford, the parent of Ford Credit, and Ford Credit 'BBB-' with a Stable Rating Outlook.
Wholesale Vehicle Market (WVM): The U.S. wholesale vehicle market is currently healthy. However, Fitch remains cautious of the potential impact of general economic weakness and rising fuel prices on demand for and values of used vehicles.
Consistent Origination/Underwriting/Servicing: Ford Credit demonstrates good capabilities as originator, underwriter, and servicer, evidenced by historical delinquency and loss performance of its managed portfolio and securitizations. Fitch deems Ford Credit capable to adequately service 2013-C.
Integrity of Legal Structure: The legal structure of the transaction should provide that a bankruptcy of Ford Credit would not impair the timeliness of payments on the securities.
Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than the base case and could result in potential rating actions on the notes. Fitch evaluated the sensitivity of the ratings assigned to all classes of Ford Credit Auto Owner Trust 2013-C to increased losses over the life of the transaction. Fitch's analysis found that the class B, C and D notes display some sensitivity to increased defaults and losses, showing potential downgrades of up to one category under Fitch's moderate (1.5x base case loss) scenario. All classes of notes could experience downgrades of up to two rating categories under Fitch's severe (2.5x base case loss) scenario.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.
The presale report is available to all investors on Fitch's website at 'www.fitchratings.com'. For more information about Fitch's comprehensive subscription service FitchResearch, which includes all presale reports, surveillance, and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at 'email@example.com'.
Link to Fitch Ratings' Report: Ford Credit Auto Owner Trust 2013-C (US ABS)