S&P: Fuyuan 2016-2 Retail Auto Mortgage Loan Securitization Trust ABS Assigned Ratings
With an aggregate outstanding principal balance of RMB3.0 billion, the collateralized assets are more than 40,000 loans that have been extended to Chinese retail borrowers to finance the purchase of Ford - and Lincoln-brand new cars. The loans have original terms of 24 months, 36 months, or 48 months, though most exhibit remaining terms no longer than 36 months. Initial loan-to-value (LTV) ratios are mostly 30% to 80%, and the weighted-average initial LTV ratio is 61.9%.
This is the fifth auto loan securitization transaction originated by FAFC. The ratings assigned to the notes issued by Fuyuan 2016-2 Retail Auto Mortgage Loan Securitization Trust reflect:The credit risk associated with the underlying collateral portfolio and the credit support available are commensurate with our view of credit risk under 'AA' and 'A+' rating stresses. Our assessment of credit risk takes into account originator FAFC's underwriting standards and centralized approval process, which largely leverages parent company Ford Credit Co.'s global practice and risk-management approach, with some local adaptation. Credit support for the class A notes comprises the subordination of the class B notes and the subordinated notes, and overcollateralization via RMB33.9 million of additional collateral. Credit support for the class B notes includes the subordination of the subordinated notes and the RMB33.9 million overcollateralization. In addition, any balance remaining in the cash reserve on the maturity date of the notes or when the receivables pool balance reaches zero can be applied toward redemption of the class A and class B notes, providing additional support. The transaction's cash flows can meet the timely payment of interest and ultimate payment of principal to the rated noteholders under stresses commensurate with the ratings assigned. We have assessed all rating stresses on the basis that the issuer does not call the notes on or beyond the call-option threshold date, and that the notes must be fully redeemed via the mechanisms under the transaction documents. The timely payment of senior expenses and rated note coupon is supported by the use of interest and principal collections from the underlying pool of loans and a nonamortizing liquidity reserve of RMB30 million, which equals 1.0% of the initial loan balance as of the cut-off date. The liquidity reserve will be fully funded by FAFC at closing and can be used to support senior expenses and rated note interest on any trust payment date. The legal structure of the trust is established as a special-purpose trust (SPT) under China's Trust Law, and the transaction structure and terms are consistent with the governance of China Banking Regulatory Commission and The People's Bank of China's credit assets securitization scheme. The legal structure of the SPT meets our criteria for insolvency remoteness. Our ratings also reflect the counterparty exposure to Bank of China Ltd. as a bank account provider. The rating on the bank account provider, coupled with the replacement trigger of the bank account provider if its rating falls below a certain level, is consistent with our "Counterparty Risk Framework Methodology And Assumptions" counterparty criteria, published on June 25, 2013.