Ford Auto Securitization Trust (Series 2017-R5)

Transcription

1 Presale: Ford Auto Securitization Trust (Series 2017-R5) This presale report is based on information as of Oct. 12, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings Class Preliminary rating(i) Type Interest rate (ii) Preliminary amount (mil. C$) Legal final maturity date A-1 AAA (sf) Senior Fixed Oct. 15, 2019 A-2 AAA (sf) Senior Fixed Nov. 15, 2021 A-3 AAA (sf) Senior Fixed March 15, 2023 B AA+ (sf) Subordinate Fixed June 15, 2023 C NR Subordinate Fixed April 15, 2025 (i)the rating on each class of securities is preliminary and subject to change at any time. (ii)the actual coupons of each class will be determined on the pricing date. NR--Not rated. Profile Expected closing date Oct. 24, Collateral Originator, seller, servicer, and administrative agent Performance guarantor Indenture trustee Issuer trustee A pool of Canadian dollar-denominated fixed-rate prime auto loan receivables originated by Ford Credit Canada Co. Ford Credit Canada Co. Ford Motor Credit Co. LLC (Ford Credit)(i). BNY Trust Co. of Canada. Computershare Trust Co. of Canada. (i)ford Motor Credit Co. LLC guarantees the performance of the seller's obligations, including its obligations as the servicer, under the sale and servicing agreement. Primary Credit Analyst: Jennie P Lam, New York (1) ; jennie.lam@spglobal.com See complete contact list on last page(s) OCTOBER 12,

2 Ford Auto Securitization Trust Credit Enhancement Summary Series 2017-R5 Series 2017-R2(i) Series 2015-R4 Subordination (% of the initial adjusted receivables balance) Class A Class B Class C Class D N/A Reserve account (% of the initial gross receivables balance)(ii) Initial Target Floor Overcollateralization Initial (% of the initial adjusted pool balance) Target (% of the current gross pool balance and includes the reserve)(iii) 0.00 (2.00) (2.00) Total initial hard credit enhancement (% of the initial adjusted receivables balance) Class A Class B Class C Class D N/A (0.86) (0.88) Excess spread (%) Estimated natural excess spread (without YSOA) per year(iv) (1.50) (0.71) (0.46) YSOA discount rate Estimated excess spread (including the YSOA) per year Initial gross receivables balance (C$) ,025, ,482, ,850,220 Initial YSOA (C$) 84,173,366 74,340,895 63,789,553 Initial adjusted receivables balance (C$) YSOA as % of the adjusted receivables balance 529,851, ,141, ,060, Total securities issued (C$) 529,850, ,740, ,600,000 (i)fccc's last public FAST issuance. Not rated by S&P Global. (ii)the reserve account represents 1.16%, 1.14%, and 1.12% of the initial adjusted pool balance for the series 2017-R5, 2017-R2, and 2015-R4 transactions, respectively. (iii)the target overcollateralization amount (on an adjusted pool basis) for series 2017-R5 will equal 1.50% of the current pool balance minus the reserve account amount (1.00% of the initial pool balance), plus 2.0% of the initial adjusted pool balance. For series 2017-R2 and series 2015-R5, the target overcollateralization amount (on an adjusted pool basis) equals 1.50% of the current pool balance minus the reserve account (1.00% of the initial pool balance). (iv)the time-weighted cost of debt that is used to estimate excess spread is calculated as a percentage of the collateral balance. YSOA--Yield supplement overcollateralization amount. N/A--Not applicable. FCCC--Ford Credit Canada Co. FAST--Ford Auto Securitization Trust. OCTOBER 12,

3 Rationale The preliminary ratings assigned to Ford Auto Securitization Trust's (FAST's) asset-backed notes series 2017-R5 reflect our view of: The availability of approximately 13.5% and 11.6% credit support to the class A and B notes, respectively, based on stressed break-even cash flow scenarios. These credit support levels provide coverage of more than 5.0x and 4.5x coverage of our expected cumulative net loss range of 1.00%-1.20% for the class A and B notes, respectively (see S&P Global Ratings' Expected Loss section for more information). Our expectation that under a moderate, or 'BBB', stress scenario, all else being equal, the ratings on the class A and B notes would not be lowered. This is within the rating tolerance for 'AAA (sf)' and 'AA (sf)' rated securities, as outlined in our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010). The credit enhancement in the form of subordination, overcollateralization, a reserve account, the yield supplement overcollateralization amount (YSOA), and excess spread (see the Credit Enhancement Summary table above for more information). The timely interest and full principal payments made under stressed cash flow modeling scenarios that we deem appropriate for the assigned preliminary ratings. Ford Credit Canada Co.'s (FCCC's) extensive securitization performance history. The collateral pool and characteristics of the collateral pool being securitized, historical collateral performance, and our forward-looking view of the Canadian economy. The transaction's payment structure, cash flow mechanics, and legal structure. Changes From The Series 2017-R2 And Series 2015-R4 Transactions FCCC has made a few structural changes to its FAST securitization platform beginning with series 2017-R5, including: Eliminating the class D notes from the structure. This change, in effect, has the transaction, at closing, starting at par (i.e. the debt issuance is equal to the adjusted pool balance), whereas previously the debt issuance exceeded the adjusted pool balance by 2.0% at closing. The targeted overcollateralization amount, as currently defined, increased the targeted amount by 200 basis points of the initial adjusted pool balance. Other structural and credit enhancement changes from series 2017-R2 (FCCC's last publicly placed transaction, which we did not rate) include: The YSOA discount rate increased to 7.70% from 7.20%. The YSOA percentage increased to 15.89% of the adjusted pool balance from 14.02%. Structural and credit enhancement changes from series 2015-R4 (FCCC's last publicly placed FAST transaction that we rated) include: The YSOA discount rate increased to 7.70% from 7.10%. The YSOA percentage increased to 15.89% of the adjusted pool balance from 12.10%. The collateral composition changes from the series 2017-R2 transaction include the following: OCTOBER 12,

4 The weighted average FICO for the aggregate pool, at origination, increased slightly to 756 from 754. The weighted average original term increased slightly to approximately 69.1 from 68.3 months. The percentage of longer-term contracts (those with an original term greater than 60 months but less than or equal to 84 months) increased slightly to 67.5% from 66.1%; however, the weighted average FICO score of these contracts increased to 745 from 740, indicating that the pool of longer-term contracts included in series 2017-R5 may be of slightly better credit quality as measured by FICO. The percentage of contracts with an original term of months increased to 15.6% from 10.9% (the maximum original term in both series is 84 months). The pool's weighted average seasoning decreased slightly to approximately 7.2 months from 8.2 months. The weighted average loan-to-value (LTV) increased to 107.5% from 106.9%. The collateral composition changes from the series 2015-R4 transaction include the following: The weighted average FICO for the aggregate pool, at origination, increased to 756 from 750. The weighted average original term increased slightly to approximately 69.1 from 67.6 months. The percentage of longer-term contracts (those with an original term greater than 60 months but less than or equal to 84 months) increased to 67.5% from 60.4%, and the weighted average FICO score of these contracts increased to 745 from 732. The percentage of contracts with an original term of months increased to 15.6% from 11.5% (the maximum original term in both series is 84 months). The pool's weighted average seasoning decreased to approximately 7.2 from 8.9 months. The weighted average loan-to-value (LTV) decreased to 107.5% from 108.7%. In our view, the series 2017-R5 pool is generally similar to that of series 2017-R2 and series 2015-R4. While the percentage of longer-term loans (61-84 months) has increased from those series, we believe that the series 2017-R5 pool's higher credit quality, as measured by the weighted average FICO on the aggregate pool and on the longer-term loans, will help to mitigate and offset any negative material impact of the longer-terms loans. Our expected cumulative net loss for series 2017-R5 is 1.00%-1.20%, consistent with our initial cumulative net loss range for series 2015-R4, the last publicly placed FAST transaction we rated (see S&P Global Ratings' Expected Loss section for more information). Transaction Overview FCCC began publicly issuing under its Canadian retail term securitization program in Similar to prior transactions, the series 2017-R5 collateral pool will consist of prime, fixed-rate retail conditional sale contracts that are secured by new and used vehicles originated by motor vehicle dealers and purchased by FCCC. The transaction is structured as a one-tier true sale of the receivables from FCCC to FAST, a bankruptcy-remote, special-purpose entity (SPE). FAST was established as a multiuse SPE capable of issuing multiple debt series. Each series in the multiuse SPE will be backed by a discrete asset pool, have a lien on the related asset group, and have its own agreement governing payment distributions. The issuing entity will issue the notes and pledge the receivables and related assets to the indenture trustee to secure the notes for the noteholder's benefit. We expect FAST to issue C$ million notes for the series 2017-R5 issuance, of which approximately C$ million (class A-1, A-2, A-3, and B) notes will be rated. Interest and principal are scheduled to be paid on each monthly OCTOBER 12,

5 distribution date, beginning Nov. 15, We expect the series 2017-R5 notes to have a fixed interest rate and principal to be paid to the notes sequentially. In rating this transaction, we will review the legal matters and opinions that we believe are relevant in our analysis as outlined in our criteria. Transaction Structure The series 2017-R5 transaction incorporates the following structural features: A sequential-pay mechanism that results in increased credit enhancement for the senior notes as the pool amortizes. A YSOA that amortizes according to a schedule (it is not recalculated and reduced when the low-yielding assets prepay). A nonamortizing reserve account. Excess spread that, to the extent available after covering net losses, can be used to pay principal on the outstanding OCTOBER 12,

6 notes to build credit enhancement to the target level. The YSOA is sized so that the yield on the contracts with annual percentage rates (APRs) below the YSOA discount rate matches the YSOA discount rate. The YSOA for each distribution date will be calculated at closing, assuming zero prepayments and zero defaults, and will amortize according to a schedule. On the closing date, we expect the YSOA to be C$84.17 million, or approximately 15.9% of the C$ million original adjusted receivables balance (or 13.7% of the C$ million initial gross receivables balance). The YSOA discount rate is 7.70%. The transaction structure that FCCC presented to us includes a targeted overcollateralization amount equal to the YSOA plus 2.0% of the initial adjusted pool balance plus the excess, if any, of 1.50% of the outstanding receivables balance over the required reserve account amount (1.00% of the initial gross receivables balance). Overcollateralization will begin at 0% of the initial adjusted pool balance and build to the target amount. Payment Structure Interest and principal are scheduled to be paid on each monthly distribution date. The payment priority stipulates that the auto receivable collections will be used to make the distributions shown in table 1. In addition, the funds in the reserve account will be available to cover interest shortfalls, make priority principal payments, and make principal payments that are due on the notes' final maturity date. Table 1 Payment Waterfall Priority Payment 1 Indenture trustee and issuer trustee fees, capped at C$150,000 per year. 2 Servicing fee of 1.00%, if FCCC is not the servicer. 3 Class A note interest, pro rata. 4 First-priority principal payment (if the class A notes' balance is greater than the adjusted pool balance). 5 Class B note interest. 6 Second-priority principal payment (if the combined class A and B notes' balance is greater than the adjusted pool balance). 7 Class C note interest. 8 An amount to restore the reserve account to its required amount. 9 Regular principal payment(i). 10 Any unpaid trustee fees and expenses. 11 Administrative agent and financial services agent fees and expenses, any tax liabilities of the trust, and any amounts due to the trust's beneficiary. 12 Any remaining amounts to the seller as the deferred purchase price. (i)the regular principal payment amount is designed to build overcollateralization on the closing date to the target overcollateralization amount: the YSOA plus 2.00% of the initial adjusted pool balance plus 1.50% of the gross current pool balance (including the reserve amount). If the note balance exceeds the adjusted pool balance (before the target overcollateralization amount is reached), principal collections and excess spread will be used to pay down the notes until the note balance equals the adjusted pool balance (items 4 and 6) and the overcollateralization target (including the reserve amount) is reached (item 9). FCCC--Ford Credit Canada Co. YSOA--Yield supplement overcollateralization amount. OCTOBER 12,

7 Origination, Servicing, And Collections FCCC's originations, collections, and servicing strategies, as well as its related technological systems, are similar to those employed by Ford Motor Credit Co. LLC (Ford Credit) in the U.S. FCCC's underwriting and purchasing strategy includes using proprietary internal scoring models to assess a potential obligor's creditworthiness. These scoring models consider the customer's financial characteristics, the retail conditional sale contract's proposed terms, and the applicant's credit history. FCCC frequently reviews the predictability of its scoring models and updates those models in response to changing economic factors, market conditions, and loss/delinquency levels. FCCC launched its latest originations scoring model for consumer applications in May 2016 and for commercial applications in April FCCC's electronic decisioning models evaluate the submitted applications and automatically approve those applications that meet certain credit thresholds. FCCC has been the servicer for each of its securitizations since Over 98% of the obligors make electronic payments. FCCC uses an internally developed behavior scoring model to determine payment default probabilities for current receivables. This behavior scoring model is designed to reduce credit losses by focusing FCCC's collections effort on higher-risk accounts. The behavior scorecard considers each loan's origination characteristics, customer account history, payment patterns, expected loss or severity and periodically updated FICO scores for individual non-business entity obligors. To maintain an optimal collection strategy, FCCC frequently updates its behavioral scorecard and tests new servicing practices. FCCC's account servicing currently operates from a centralized business center in Edmonton, Alberta. Managed Portfolio FCCC's portfolio has experienced relatively stable year-over-year performance, with 2017 performance improving slightly compared to a year ago (see table 2). Delinquencies as a percentage of the average number of contracts outstanding decreased to 0.88% as of June 30, 2017, compared with 0.98% a year prior. Likewise, delinquencies as a percentage of the average principal balance of the outstanding portfolio decreased to 0.78% as of June 30, 2017, compared with 0.82% a year prior. For the six months ended June 30, 2017, repossessions as a percentage of the average number of contracts outstanding decreased to 0.81% from 0.98% a year ago. Net losses as a percentage of the average portfolio outstanding decreased to 0.44% for the six months ended June 30, 2017, from 0.57% a year ago. Per FCCC, the improvement in delinquencies, repossessions, and net losses during the six months ended June 2017 can be attributed to improved economic conditions in the oil and gas industry, mainly in Alberta, resulting in fewer repossession and skip contracts charged off. Table 2 Managed Portfolio Avg. number of contracts outstanding Six months ended June 30 Year ended Dec , , , , , , ,829 OCTOBER 12,

8 Table 2 Managed Portfolio Avg. portfolio outstanding during the period (mil. C$) (cont.) Six months ended June 30 Year ended Dec ,924 8,983 9,569 7,989 7,194 6,878 6,436 Avg. number of delinquencies as a percentage of average number of contracts outstanding (%) days days days Over 120 days Total delinquencies Aggregate principal balance of delinquent contracts as a percentage of the portfolio outstanding (%) days days days Over 120 days Total delinquencies Repossessions as a % of the avg. no. of contracts outstanding (%) Net losses as a % of the avg. portfolio outstanding (%) Securitization Performance We maintain ratings on two active public retail FAST transactions, series 2013-R4 and 2015-R4. The transactions are performing better than our original loss expectations. Based on current performance, we believe the transactions will experience a lifetime cumulative net loss of 0.65%-0.75% and 0.85%-0.95%, respectively (see table 3). Table 3 Collateral Performance (%) As of the September 2017 distribution date Series Mo. Pool factor Current CNL 60+ day delinq. Original lifetime CNL exp. Revised lifetime CNL exp R R Mo.--Month. Delinq. Delinquencies. CNL--Cumulative net loss. On Sept. 8, 2017, we raised our ratings to 'AAA (sf)' on three classes of subordinate notes from series 2015-R4 and affirmed our 'AAA (sf)' ratings on the class A notes from the same transaction. In addition, we affirmed our 'AAA (sf)' ratings on the series 2013-R4 notes (see "Three Ratings Raised And Six Affirmed On Two Ford Auto Securitization OCTOBER 12,

9 Trust Series," published Sept. 8, 2017). We will continue to monitor the performance of all of the outstanding transactions to ensure that the credit enhancement remains sufficient, in our view, to cover our cumulative net loss expectations under our stress scenarios for each of the rated classes. Loss performance on FAST transactions remains relatively stable and consistent, reflecting FCCC's comparable collateral pools (see chart 2 for FAST paid-off pools and chart 3 for FAST outstanding pools). Chart 2 OCTOBER 12,

10 Chart 3 FCCC's recovery rate experience on its public securitizations issued in and rated by S&P Global Ratings indicates cumulative recovery rates of approximately 59% (see chart 4). OCTOBER 12,

11 Chart 4 Pool Analysis We compared the series 2017-R5 pool's quality with that of previous FAST pools (see table 4a and 4b). In our view, the FAST pools show comparable collateral characteristics. Table 4a Collateral Comparison(i) FAST Pool size (mil. C$) No. of receivables Avg. principal balance (C$) 2017-R R R R R R R R R R R ,699 19,013 17,759 17,358 16,695 21,559 25,987 20,332 28,073 20,771 17,731 39,112 38,453 36,688 34,824 30,655 33,481 35,849 35,566 31,799 33,227 33,197 OCTOBER 12,

12 Table 4a Collateral Comparison(i) (cont.) FAST avg. APR excluding the YSOA (%) avg. original term (mos.) avg. remaining (mos.) avg. seasoning (mos.) Total % of loans with an original term of 60-plus mos. % of loans with an original term of mos. New vehicle (%) Used vehicle (%) avg. original FICO score(ii) avg. FICO score of pools with an original term of greater than 60 mos. avg. LTV at origination (%) 2017-R R R R R R R R R R R Top five province concentrations (%) ON= OCTOBER 12,

13 Table 4a Collateral Comparison(i) (cont.) FAST 2017-R R R R R R R R R R R2 AB=19.32 QC=17.23 BC=10.37 SK=5.30 (i)all percentages are of the initial gross receivables balance. (ii)excludes receivables that represent commercial accounts or obligors with little credit history. APR--Annual percentage rate. YSOA--Yield supplement overcollateralization amount. Table 4b Collateral Comparison(i) FAST Pool size (mil. C$) No. of receivables Avg. principal balance (C$) avg. APR excluding the YSOA (%) avg. original term (mos.) avg. remaining (mos.) avg. seasoning (mos.) Total % of loans with an original term of 60-plus mos. % of loans with an original term of mos. New vehicle (%) 2016-R R R R R R R R R R ,911 18,561 19,320 15,462 20,391 17,882 23,817 16,524 18,118 34,454 32,820 31,833 30,293 30,307 28,523 30,826 29,230 28,909 28,531 22, OCTOBER 12,

14 Table 4b Collateral Comparison(i) (cont.) FAST Used vehicle (%) avg. original FICO score(ii) avg. FICO score of pools with an original term of greater than 60 mos. avg. LTV at origination (%) 2016-R R R R R R R R R R Top five province concentrations (%) ON=31.21 AB=23.03 QC=16.05 BC=9.47 SK=6.60 ON=30.47 AB=23.21 QC=19.33 BC=7.94 SK=6.63 (i)all percentages are of the initial gross receivables balance. (ii)excludes receivables that represent commercial accounts or obligors with little credit history. APR--Annual percentage rate. YSOA--Yield supplement overcollateralization amount. S&P Global Ratings' Expected Loss: 1.00%-1.20% To derive the base-case expected loss for the series 2017-R5 transaction, we analyzed historical static origination net loss data on FCCC's managed portfolio. The data we received was segmented by credit score band, receivable term, new- and used-vehicle mix, vehicle type, and APR subvention, and we developed expected net loss projections for each combination of those segments. We then weighted these projections based on the actual concentration of the various segments in the series 2017-R5 pool to estimate our overall expected net loss. In addition, we examined the cumulative net loss performance of outstanding securitized FAST pools with collateral characteristics similar to the series 2017-R5 pool. We then projected losses associated with these comparable pools using loss curves derived from pools that are nearly paid off. Our cumulative net loss expectation also factors for possible lower future recoveries. Furthermore, we considered the series 2017-R5 pool's credit profile compared with recent FAST pools. Based on our static origination net loss analysis, FCCC's managed portfolio performance, performance on outstanding FAST OCTOBER 12,

15 securitization pools, and our forward-looking view of used vehicle values, recovery rates, and the Canadian economy, we expect the FAST series 2017-R5 pool to experience cumulative net losses in the 1.00%-1.20% range. Cash Flow Modeling Assumptions And Results We modeled the series 2017-R5 transaction to simulate 'AAA' and 'AA+' rating stress scenarios (see table 5). In our modeling approach, we used a bifurcated-pool method in which the subvened receivables (for cash flow purposes, we define "subvened receivables" as those with APRs of 4% or lower) prepay at much slower rates than the nonsubvened receivables. We also disproportionally allocated between the subvened and nonsubvened receivables, with 93% of the pool (subvened) incurring approximately 85% of total net loss and the remaining 7% (nonsubvened) incurring approximately 15% of total net loss. Performance data indicate that subvened pools not only incur lower losses, but also have a slightly lower loss timing curve, which we have reflected in our assumptions below. Table 5 Cash Flow Assumptions And Results (Two-Pool Approach) Class A Class B Scenario (preliminary rating) AAA (sf) AA+ (sf) Cumulative net loss timing (mos.) 12/24/36/48 12/24/36/48 Subvened cumulative net loss (%) 30/65/90/100 30/65/90/100 Nonsubvened cumulative net loss (%) 51/84/100 48/78/100 Aggregate cumulative net loss 33/65/92/100 33/65/92/100 Subvened receivables (%) Nonsubvened receivables (%) 7 7 Disproportionate loss allocation (%) Subvened Nonsubvened ABS voluntary prepayments (%) Subvened(i) Nonsubvened(i) Recoveries (%) Recovery lag (mos.) 4 4 Approximate break-even net loss levels (%)(ii) (i)the subvened/nonsubvened cut-off annual percentage rate is 4.0%. (ii)the maximum cumulative net losses on the pool that the transaction can withstand without triggering a payment default on the relevant class of notes. ABS--Absolute prepayment speed. By running low prepayments and disproportionally lower losses on the lower-apr receivables and applying a slower loss curve to these receivables than to the higher-apr receivables, the cash flows stressed the weighted average APR on the collateral, causing it to decrease over time. This increases the likelihood that the YSOA will be used for yield enhancement, rather than credit enhancement. In a stressed scenario, liquidity risk could arise because of interest shortfalls caused by the yield on the assets being lower than the yield on the bonds (especially because the bonds pay sequentially, leading to higher-coupon debt outstanding at the tail end of the transaction). Increasing the use of the OCTOBER 12,

16 YSOA for liquidity decreases the amount of the YSOA available to cover credit losses, thereby decreasing break-even levels. Under the front-ended and back-ended loss curve scenarios, the breakeven net loss results show that the available credit support for the class A and B notes provide sufficient coverage appropriate for the assigned preliminary ratings. Sensitivity Analysis In addition to running break-even cash flows, we ran sensitivity scenarios to see how the ratings on the class A and B notes could be affected by losses that are moderately higher than what we currently expect (see table 6 and chart 5). Table 6 Sensitivity Analysis Summary Loss level (multiple) 2.0x base case Cumulative net loss level (%) 2.30 Loss timing by months outstanding (12/24/36/48) (%) Nonsubvened 30/65/90/100 Subvened 41/66/91/100 Aggregate 32/66/91/100 Disproportionate loss allocation (%) Nonsubvened 15 Subvened 85 Voluntary ABS (%)(i) Nonsubvened 1.50 Subvened 0.25 Servicing fee (%) 1.05 Recovery rate (%) 50 Recovery lag (mos.) 4 Haircut to excess spread (%) 10 Coverage of remaining losses Class A Class B Initially 6.2x and growing thereafter Initially 5.1x and growing thereafter (i)the subvened/nonsubvened cut-off annual percentage rate is 4.0%. ABS--Absolute prepayment speed. OCTOBER 12,

17 Chart 5 Moderate loss scenario: 2.30% cumulative net loss results Under the moderate stress loss scenario, we assumed cumulative net losses of 2.30% (approximately 2.0x our cumulative expected net loss level) and loss curves on the subvened and nonsubvened loans that are similar to what we used in break-even stress scenarios. As with our break-even stress scenarios, we allocated losses disproportionately between the subvened and nonsubvened loans. In addition, we assumed a 50% recovery rate on gross losses. To stress excess spread, we assumed a voluntary prepayment speed of 1.50% for the nonsubvened loans and 0.25% for subvened loans. We also applied a 10% haircut to the remaining excess spread at any given month. Under this scenario, the transaction reached the overcollateralization target (and released excess cash) in month nine; the reserve account stays at the target amount throughout the transaction's life; interest is paid on time to all classes; and the class A-1, A-2, A-3, and B notes are paid in full in months 16, 42, 60, and 63, respectively. In our view, under the 2.0x moderate stress scenarios, all else being equal, we expect that our ratings on the class A and B notes will not be lowered from our preliminary ratings of 'AAA (sf)' and 'AA+ (sf)', respectively. OCTOBER 12,

18 Legal Final Maturity To test the legal final maturity dates, we determined the dates on which the respective notes were fully amortized in a zero-loss, zero-prepayment scenario and then added three months to the result. In our break-even cash flow scenario for each respective rating level, we confirmed that there was sufficient credit enhancement to both cover losses and repay the related notes in full by the proposed legal final maturity date. FCCC FCCC, established in 1962, is a Nova Scotia unlimited liability company and an indirect, wholly owned subsidiary of Ford Credit. Until January 2017, FCCC operated as a federal corporation under the name of Ford Credit Canada Ltd. During the first six months of 2017, FCCC had an average retail receivable portfolio of approximately C$10.9 billion. FCCC offers consumer retail contracts, consumer leases, business loans, and lines of credit to Canadian dealerships that sell Ford vehicles. FCCC provides financing to buyers of Ford vehicles through Ford and Lincoln dealerships. Related Criteria Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017 Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, 2016 Criteria - Structured Finance - General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015 Criteria - Structured Finance - ABS: General Methodology And Assumptions For Rating Canadian Auto Loan ABS, April 26, 2013 Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Criteria - Structured Finance - ABS: General Methodology And Assumptions For Rating U.S. Auto Loan Securitizations, Jan. 11, 2011 Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Criteria - Structured Finance - ABS: Equipment Leasing Criteria: Credit Risks Evaluated In Lease-Backed Securitizations, Sept. 1, 2004 Related Research Three Ratings Raised And Six Affirmed On Two Ford Auto Securitization Trust Series, Sept. 8, 2017 Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When OCTOBER 12,

19 Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, Analytical Team Primary Credit Analyst: Jennie P Lam, New York (1) ; jennie.lam@spglobal.com OCTOBER 12,

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