Ford Credit Auto Lease Trust 2015-A

Transcription

1 Presale: Ford Credit Auto Lease Trust 2015-A Primary Credit Analyst: Jennie P Lam, New York (1) ; jennie.lam@standardandpoors.com Surveillance Credit Analyst: Peter W Chang, CFA, New York (1) ; peter.chang@standardandpoors.com Table Of Contents $ Million Asset-Backed Notes Series 2015-A Rationale Changes From FCALT 2014-B Transaction Overview Legal Structure Pension Benefit Guaranty Corp. (PBGC) Risk Payment Structure Managed Portfolio Performance Securitization Performance Surveillance Update Pool Analysis Residual Value Lease Residual Timing APRIL 16,

2 Table Of Contents (cont.) Standard & Poor's Expected Loss Cash Flow Modeling Sensitivity Analysis Money Market Tranche Sizing Legal Final Maturity Ford Credit Standard & Poor's 17g-7 Disclosure Report Related Criteria And Research APRIL 16,

3 Presale: Ford Credit Auto Lease Trust 2015-A $ Million Asset-Backed Notes Series 2015-A This presale report is based on information as of April 16, 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 As Of April 16, 2015 Class Preliminary rating(i) Type Interest rate(ii) Preliminary amount (mil. $)(iii) Expected legal final maturity date A-1 A-1+ (sf) Senior Fixed May 15, 2016 A-2a/A-2b(iv) AAA (sf) Senior Fixed/floating Dec. 15, 2017 A-3 AAA (sf) Senior Fixed June 15, 2018 A-4 AAA (sf) Senior Fixed Aug. 15, 2018 B AA+ (sf) Subordinate Fixed Sept. 15, 2018 C NR Subordinate Fixed Nov. 15, 2019 (i)the rating on each class of securities is preliminary and subject to change at any time. (ii)the interest rates will be determined on the pricing date. (iii)the actual size of these tranches will be determined on the pricing date. (iv)the class A-2 notes will be issued as a combination of fixed-rate notes (class A-2a) and floating-rate notes (class A-2b). The principal amount allocation between the two tranches will be determined on or before the pricing date. The trust expects that the principal balance of the class A-2b notes will not exceed $290 million. NR--Not rated. Profile Expected closing date April 28, Collateral Prime auto lease receivables. Titling companies CAB East LLC and CAB West LLC. Servicer and sponsor Ford Motor Credit Co. LLC (BBB-/Stable/A-3). Depositor Ford Credit Auto Lease Two LLC. Issuing Entity Ford Credit Auto Lease Trust 2015-A. Lead underwriter Citigroup Global Markets Inc. Collateral agent HTD Leasing LLC. Administrative agent U.S. Bank N.A. Indenture trustee The Bank of New York Mellon. Owner trustee U.S. Bank Trust N.A. Credit Enhancement Summary(i) FCALT 2015-A FCALT 2014-B Initial(i) Target(i) Floor(i) Initial(i) Target(i) Floor(i) Class A credit enhancement Subordination (%) Overcollateralization (%) APRIL 16,

4 Credit Enhancement Summary(i) (cont.) Reserve account (%) Total (%) Class B credit enhancement Subordination (%) Overcollateralization (%) Reserve account (%) Total (%) Class C credit enhancement Subordination (%) Overcollateralization (%) Reserve account (%) Total (%) Estimated excess spread per year (%) Discount rate (%) Initial aggregate securitization value ($) 1,126,139,672 1,689,193,621 Total securities issued ($) 1,000,000,000 1,500,000,000 (i)all percentages are based on the initial aggregate securitization value. FCALT--Ford Credit Auto Lease Trust. Rationale The preliminary ratings assigned to Ford Credit Auto Lease Trust 2015-A's (FCALT 2015-A's) asset-backed notes series 2015-A reflect our view of: The availability of approximately 26.7% and 22.4% credit enhancement for the class A and B notes, respectively, in the form of 8.70% and 4.20% subordination; 11.20% overcollateralization, which will build to a target of 13.70% of the initial securitization value; a 0.50% nonamortizing reserve account; and excess spread (all percentages are measured in terms of the pool's initial aggregate securitization value). The credit quality of the underlying collateral, which consists of prime auto lease receivables that have a weighted average FICO score of 742. The diversified mix of vehicle models and vehicle types in the pool. The expected timing of the residuals' maturities. The historical residual retention values of vehicles in the pool. The Automotive Lease Guide's (ALG's) forecast of each vehicle's residual value at lease inception and of current residuals. The timely interest and full principal payments by the notes' legal final maturity dates made under cash flow scenarios that were stressed for credit, residual, and incentive program losses that are consistent with the assigned preliminary ratings. The transaction's payment and legal structures. Our expected base-case credit loss for the FCALT 2015-A pool is 0.65%-0.85% of the securitization value, which reflects the credit performance of Ford Motor Credit Co. LLC's (Ford Credit's) auto lease securitizations, our static pool loss projections for its lease originations, FCALT 2015-A's collateral composition, peer comparisons, and a APRIL 16,

5 forward-looking view of the economy. Our 'AAA' stressed scenario for credit losses ranges from 3.25%-4.25% of the securitization value. Our 'AAA' residual stress for the FCALT 2015-A pool is approximately 26.9% of the pool's aggregate undiscounted base residual value. After applying this stress to the residual value portion of the pool (74.21%) and the portion of nondefaulting leases (92.0%) under this scenario, our 'AAA' residual stress constituted approximately 18.4% of the securitization value. Our 'AA+' residual stress for the FCALT 2015-A pool is approximately 23.8% of its aggregate undiscounted base residual value. After applying this stress to the residual value portion of the pool and the nondefaulting leases (92.8%), our 'AA+' stress was approximately 16.0% of the securitization value. Changes From FCALT 2014-B The structural and credit enhancement changes from the series 2014-B transaction are as follows: The securitization discount rate increased to 6.50% from 6.15%. The estimated excess spread of 4.16% per year is similar to that estimated for FCALT 2014-B (4.14%) before the transaction's pricing. Post-pricing, the estimated excess spread per year for series 2014-B increased to 4.27%. The collateral composition changes from FCALT 2014-B are: The weighted average FICO score decreased slightly to 742 from 746. The percentage of leases with an original term of months increased to approximately 84% from 79%, while the percentage of leases with an original term of 24 months decreased to approximately 16% from 21%. The top three vehicle models in the 2015-A pool make up approximately 52.0% of the pool by residual value, compared with 47.5% for the series 2014-B pool. The top three vehicle models in the series 2015-A pool, measured by residual value, are Escape (19.4%), F-150 (17.2%), and Explorer (15.4%). The top three vehicle models in the 2014-B pool at closing were Fusion (16.5%), Escape (15.8%), and Explorer (15.2%). Transaction Overview FCALT 2015-A is Ford Credit's ninth public auto lease transaction since FCALT 2015-A's transaction structure incorporates an initial reserve amount of 0.50% of the initial securitization value; an overcollateralization amount of 11.20% that builds to a target of 13.70% of the initial securitization value; subordination of 8.70% and 4.20% for the class A and B notes, respectively; and estimated excess spread of approximately 4.16% per year. The transaction uses a sequential payment method in which no hard credit support is released from the transaction until all of the rated notes are paid in full. Excess spread, however, can be released if the overcollateralization is at its target level and if the funds are not necessary to cover payments according to the payment priority. Legal Structure Ford Credit's titling companies (CAB East LLC and CAB West LLC) purchase newly originated leases and the related leased vehicles from Ford and Lincoln dealers. The leased vehicles are titled in the respective titling company's name APRIL 16,

6 and the collateral agent is named as the secured party on the certificate of title. The titling companies will issue to Ford Credit an exchange note that will be backed by a reference pool of leases and leased vehicles they purchased from dealers. The reference pool will have an initial total securitization value of $1,126,139,672, and the exchange note will have an initial note balance of $1,030,927,835. The exchange note is secured by a security interest in and is payable from the collections on the leases and the related leased vehicles in the designated reference pool. Ford Credit will sell the exchange note relating to the FCALT 2015-A collateral to Ford Credit Auto Lease Two LLC, the depositor, in a true sale. The depositor then sells the exchange note to FCALT 2015-A, a newly formed Delaware statutory trust, in a second true sale (see chart 1). The trust finances this purchase by issuing asset-backed notes, which are secured under an indenture between the owner trust and the indenture trustee. The owner trust pledges all rights under the exchange note, including the rights to payments due on the exchange note, and the collateral to the indenture trustee to secure payments on the asset-backed notes. APRIL 16,

7 Pension Benefit Guaranty Corp. (PBGC) Risk Each titling company grants a security interest in all newly originated leases and leased vehicles to HTD Leasing LLC, a third-party collateral agent. The security interest in the leases is perfected by filings under the Uniform Commercial Code (UCC), and the security interest in the leased vehicles is perfected by lien notation on the vehicle's certificate of title under state motor vehicle registration laws. Standard & Poor's Ratings Services expects to receive an opinion of counsel to the issuer, subject to customary assumptions and qualifications, to the effect that the collateral agent's security interest in the leases and leased vehicles would be before a lien in favor of PBGC and, notice of which will be filed after the series 2015-A notes are issued. A PBGC lien could be imposed against the assets of any member of the Ford Motor Co.-controlled group in the event of unpaid minimum contributions to a defined benefit pension plan required by law or if an underfunded defined benefit pension plan terminates. Payment Structure Payment priority for the exchange note On each payment date, the indenture trustee will apply collections from the reference pool and the amounts on deposit in the reserve account, if necessary, to make payments on the exchange note according to a specific payment priority (see table 1). The yield in item 2 in the exchange note payment waterfall will be equal to the yield due to the asset-backed notes plus the senior fees and expenses relating to those notes. Table 1 Payment Waterfall (Exchange Note) Priority Payment 1 The servicing fee (1% of the securitization value per year) and reimbursement of any outstanding advances to the servicer. 2 Interest due on the exchange note to the trust, as the exchange noteholder. 3 The amount needed to cover shortfalls in payments on the asset-backed notes to the trust, as the exchange noteholder. 4 The amount needed to reach the targeted reserve amount to the reserve account. 5 Principal on the exchange note (equal to the excess of the FCALT 2015-A notes principal balance over the securitization value minus the target overcollateralization amount) to the trust, as the exchange noteholder. 6 An amount to be applied as a shared amount regarding any other exchange note, other than the exchange note owned by the trust, if there has been a failure to pay principal or interest owed on such other exchange note. 7 Any remaining amounts to be applied under the revolving credit facility. FCALT--Ford Credit Auto Lease Trust. Payment priority for the asset-backed notes On each payment date, the indenture trustee will apply all amounts received on the FCALT 2015-A exchange note to make payments on the asset-backed notes according to a specific payment priority (see table 2). Once the targeted reserve amount is achieved, the excess spread will be released to the residual interest holder to the extent it is not needed to cover losses. APRIL 16,

8 Table 2 Payment Waterfall (Asset-Backed Notes) Priority Payment 1 All payments due and any trust expenses, up to $150,000 maximum per year, to the indenture and owner trustees. 2 The administration fee (0.01% of the note balance per year) to the servicer. 3 The interest due on the class A notes to the class A noteholders. 4 First-priority principal payment, equal to the excess, if any, of the class A notes' aggregate principal amount over the securitization value, payable sequentially by class. 5 The interest due on the class B notes to the class B noteholders. 6 Second-priority principal payment, equal to the excess, if any, of the class A and B notes' aggregate principal amount over the securitization value, payable sequentially by class. 7 The interest due on the class C notes to the class C noteholders. 8 An amount to the reserve account until the target reserved amount is reached. 9 Regular principal payment, which is equal to the excess of the class A, B, and C notes' aggregate principal amount over the securitzation value minus the target overcollateralization amount, minus any priority principal payments, payable sequentially by class. 10 Any amount due and unpaid to the indenture and owner trustees that are not paid in item 1 in this payment waterfall. 11 Any remaining amounts to the trust's residual interest holder. Managed Portfolio Performance For year-end 2014, Ford Credit's total serviced lease portfolio consisted (on average) of 704,275 contracts totaling $ billion. For the year ended Dec. 31, 2014, net losses as a percentage of the average portfolio outstanding increased to 1.26% from 1.17% for the year ended Dec. 31, 2013 (see table 3). Total delinquencies as a percentage of the average number of contracts outstanding were 0.91% as of Dec. 31, 2014, up from 0.87% as of Dec. 31, For the year ended Dec. 31, 2014, Ford Credit's total serviced lease portfolio reported residual gains on returned vehicles that equaled 3.26% of the vehicles' ALG-forecasted residual value. Table 3 Managed Portfolio Year ended Dec Avg. no. of contracts outstanding 704, , , , , ,511 Avg. portfolio outstanding during the period (mil. $) 18,554 14,843 10,828 7,921 9,218 14,946 Avg. delinquencies as a % of the average number of contracts outstanding Repossessions as a % of the avg. no. of contracts outstanding Net losses/(gains) as a % of the avg. portfolio outstanding (0.06) (0.07) Return rate (%) Total gain/(loss) on ALG residuals on vehicles returned to Ford Credit as a % of the ALG's residual value of returned vehicles sold by Ford Credit ALG--Automotive Lease Guide (0.13) APRIL 16,

9 Securitization Performance Ford Credit's auto lease securitizations have consistently demonstrated stable credit loss performance. Cumulative net credit losses on Ford Credit's paid-off transactions from series 2009 to 2012-A ranged from 0.18%-0.42% (see chart 2). Current cumulative net loss performance on the outstanding transactions from series 2012-B to 2014-B range from 0.10%-0.28%. In addition, Ford Credit has realized either residual value gains or very low residual losses on its securitizations (see chart 3). Chart 2 APRIL 16,

10 Chart 3 Surveillance Update We currently maintain ratings on two FCALT transactions, series 2014-A and 2014-B. Both transactions are performing in line with our expectations (see table 4). In our opinion, each of the outstanding transactions remain adequately enhanced at their current rating levels. We will continue to monitor each outstanding transaction's performance to determine if any rating action is deemed appropriate. Table 4 Performance Data For Outstanding FCALT Transactions As Of The February 2015 Distribution Date Series Month Pool factor (%) Current cumulative net credit losses (%)(i) Current cumulative net residual loss (gain) (%)(i) 2014-A B (0.04) (i)as a percentage of the aggregate initial securitization value. FCALT--Ford Credit Auto Lease Trust. APRIL 16,

11 Pool Analysis The series 2015-A securitized pool consists of 47,445 prime auto lease receivables with a weighted average FICO score of 742 (see table 5). The top five vehicle models represent approximately 74% of the initial securitization value. Approximately 84% of the pool consists of leases with original terms of months. Cars and crossovers make up the majority of vehicles in the pool, at 30.6% and 50.8%, respectively (81% combined), while sport utility vehicles (SUVs) and light trucks make up 2.1% and 16.5% of the pool, respectively (19% combined). Table 5 Original Pool Characteristics FCALT 2015-A FCALT 2014-B FCALT 2014-A FCALT 2013-B(i) FCALT 2013-A(i) FCALT 2012-B(i) FCALT 2012-A(i) FCALT 2011-B No. of leases 47,445 68,977 63,870 46,572 46,395 38,448 56,767 37,733 Initial total securitization value ($) Avg. securitization value ($) 1,126,139,672 1,689,193,621 1,560,634,970 1,135,071,232 1,116,998, ,998,846 1,364,977, ,188,636 23,736 24,489 24,435 24,372 24,076 24,058 24,045 23,327 New vehicles (%) Top five vehicles by model (%)(ii) Escape F Explorer Fusion Edge MKZ 9.0 Base residual value ($) Avg. base residual value ($) Weighted avg. original term (mos.) Weighted avg. remaining term (mos.) Weighted avg. seasoning (mos.) Original term (mos.) 835,684,381 1,211,588,268 1,146,236, ,150, ,343, ,950, ,108, ,139,748 17,614 17,565 17,946 17,890 17,358 17,087 17,336 16, APRIL 16,

12 Table 5 Original Pool Characteristics Weighted avg. FICO score Base residual as a % of the aggregate securitization value Base residual as a % of the adjusted MSRP (cont.) Top five state concentrations (%) MI=20.9 MI=17.2 MI=27.3 MI=24.6 MI=18.3 MI=20.7 MI=26.2 MI=25.2 NY=12.2 NY=13.7 NY=11.9 NY=14.0 NY=15.7 NY=15.3 NY=15.1 NY=15.6 CA=10.5 CA=10.9 CA=9.5 CA=10.0 CA=9.7 NJ=9.7 NJ=9.2 NJ=10.3 NJ=7.2 NJ=8.1 NJ=7.1 NJ=8.5 NJ=9.4 CA=9.7 CA=7.9 CA=7.4 OH=6.9 OH=7.7 OH=6.7 OH=6.8 OH=6.6 OH=7.0 OH=6.1 OH=6.0 (i)not rated by Standard & Poor's. (ii)as of percentage of the aggregate base residual value. FCALT--Ford Credit Auto Lease Trust. MSRP--Manufacturer's suggested retail price. Residual Value The notes that are being issued to finance the FCALT 2015-A pool will be secured by an exchange note that is backed by a pool of leases (and the related leased vehicles) with a securitization value of $1,126,139,672. The leases' securitization value is the sum of the present value of each lease's remaining monthly lease payment and the related leased vehicle's base residual value (both discounted at the higher of 6.50% or the contract annual percentage rate). Each leased vehicle's base residual value will equal the lower of: The stated residual value set by Ford Credit at the lease's inception; and The residual value estimate established by ALG for the leased vehicle at lease origination. The stated residual value is the vehicle's assigned residual value at the lease's inception (per the lease contract), which in turn determines the monthly lease payments. The stated residual value is typically set higher than ALG's residual value to reduce the dollar amount of lease payments that the lessee owes under the lease contract. The base residual value provides a more conservative estimate of the vehicle's future value and mitigates noteholders' exposure to losses associated with stated residual values that are set higher than the expected residual values (a process called lease subvention). The base residual is $835,684,381, or 74.21% of the FCALT 2015-A pool's securitization value. A recent ALG mark-to-market valuation indicates a residual value forecast of $839,519,867 for the pool, which is approximately 0.5% higher than the base residual. APRIL 16,

13 Lease Residual Timing The leases in the FCALT 2015-A pool are scheduled to mature as shown in table 6. Table 6 FCALT 2015-A Lease Maturity Profile By Year(i) Year (%) (i)percentage of the aggregate undiscounted base residual value. FCALT--Ford Credit Auto Lease Trust Initial lease maturities of the FCALT 2015-A pool begin in August 2015 (see chart 4). Thereafter, leases will be maturing each month, except in May 2018 and July 2018, until January There are seven months where the expected base residual maturity level exceeds our 5.0% benchmark concentration limit. The highest monthly maturity is 6.4%, which is expected to occur in August Chart 4 APRIL 16,

14 Standard & Poor's Expected Loss The transaction has three principal risk components: credit, residual, and waived payment risk. Credit risk The obligor's credit profile determines the credit risk. To derive the base-case credit loss for the series 2015-A transaction, we used static pool credit loss data provided by Ford Credit to project losses on their portfolio of lease originations segmented by credit tier, vehicle type, and lease term. We weighted the projections by the actual concentration of those various segments in the series 2015-A pool. We also considered the consistent and stable loss performance of Ford Credit's auto lease securitizations, peer performance, the series 2015-A pool's collateral credit quality compared to other FCALT pools and peer collateral pools, and our forward-looking view of the economy. Based on this information, we expect the cumulative net credit loss for the series 2015-A pool to range from 0.65%-0.85% of the pool's securitization value. Residual risk We examined and assessed residual loss on the series 2015-A pool according to our auto lease criteria, "Revised General Methodology And Assumptions For Rating U.S. ABS Auto Lease Securitizations," published Nov. 29, The residual risk in this transaction is partially mitigated because the securitized residual value is equal to the lower of the lease contract residual value and the ALG residual value. Securitizing the lower of these two values mitigates the risk associated with contract residual values that are set higher than the expected residual values to keep the monthly lease payments affordable to the lessee. Moreover, we did not give credit to ALG's mark-to-market valuation of the residual values in the lease pool, which indicated that the current base residual forecasts are approximately 0.5% higher than the original estimates. The transaction will benefit from these gains at lease maturity if the ALG's current forecast holds true. In our analysis of the series 2015-A pool's residual risk, we considered the following factors: The diversity of the pool's vehicle makes and models; The stability of historical used vehicle values on the top vehicle makes and models; The top nine vehicle models, which account for approximately 88% of the series 2015-A pool's total base residual; The ALG's historical and current forecasts in relation to the historical actual vehicle retention values per data provided by Ford Credit; The basis for the differences between the actual used vehicle values and the ALG's forecasts; The basis for the ALG's current forecast; The lease maturity profile of the series 2015-A pool; Brand perception; The consistency of the manufacturer's suggested retail price valuation; and Our macroeconomic outlook. Base haircut According to our auto lease criteria, we first applied initial rating-specific haircuts of 26.0% and 23.0% to the series 2015-A pool's base residual value, commensurate with 'AAA' and 'AA+' rating scenarios, respectively. APRIL 16,

15 Excess concentration haircut In addition to the above base haircuts, we applied a haircut to the amount of nondefaulted lease residuals exceeding the concentration limits applicable to the benchmark pool (excess concentrations), as outlined in our auto lease criteria. The series 2015-A pool has a 7.02% lease maturity excess concentration, resulting in an additional 0.91% and 0.81% base residual haircut under our 'AAA' and 'AA+' rating scenarios, respectively. The pool is diversified by model concentration and vehicle segment concentration, so we did not apply an additional haircut on these items. Speculative-grade manufacturer haircut We also look at the auto manufacturer's creditworthiness when determining the stress applied to the adjusted base residual value. Our auto lease criteria apply haircuts to the base residual value of the vehicles produced by manufacturers that have speculative-grade corporate credit ratings ('BB+' or lower). Ford Motor Co. is the manufacturer of the leased vehicles backing the FCALT 2015-A pool. On Sept. 6, 2013, we raised our long-term corporate credit ratings on Ford Motor Co. and Ford Credit to 'BBB-' from 'BB+' and revised our outlook to stable from positive. Based on our current corporate credit rating on Ford Motor Co., we did not apply a speculative-grade manufacturer haircut to the series 2015-A transaction. Low diversification haircut For pools with low diversification, as described in our auto lease criteria, we apply a low diversification haircut in addition to the other haircuts. Our auto lease criteria describe the six conditions for which, if met by the securitized lease pool, we would apply this type of haircut. The FCALT 2015-A pool does not meet any of these six conditions, so we did not apply the low diversification haircut. Stressed residual loss After analyzing the FCALT 2015-A lease pool, applying the relevant residual value haircuts, and assessing stressed return rates of 100% and 97.5% at the 'AAA' and 'AA+' rating levels, respectively (representing the loss frequency on nondefaulted leased vehicles of 92.0% and 92.8%, respectively), we determined that our stressed residual loss is approximately 18.4% and 16.0%, under our 'AAA' and 'AA+' scenarios, respectively, as a percentage of the initial securitization value. Waived payment risk The third risk in this transaction, waived payment risk, occurs when, as part of Ford Credit's Early Bird incentive program, a dealer offers the lessee an option to terminate the lease early and waive all remaining lease payments if the lessee agrees to finance a new lease or loan contract with Ford Credit. The dealer then reimburses the trust for the waived payments and Ford Credit then reimburses the dealer. If Ford Credit enters bankruptcy, we believe a certain percentage of the dealer base may also enter bankruptcy and could continue to waive lease payments to generate additional vehicle sales. These waived payments are a loss to the trust if they are not reimbursed by the dealer who waived the payments. To that end, we incorporated a waived payment risk into our cash flow analysis. We reviewed historical offer and acceptance rates and the number of waived payments offered under Ford Credit's Early Bird program and assumed the average historical experience as a base-case scenario. We then applied loss multiples applicable to our rating scenarios. Our waived payment stress was approximately 0.34% and 0.30%, under our 'AAA' and 'AA+' rating scenarios, respectively. APRIL 16,

16 We also tested FCALT 2015-A's proposed structure using cash flow scenarios to determine if the credit enhancement level was sufficient to pay timely interest and principal in full by the notes' legal final maturity dates under 'AAA' and 'AA+' stressed scenarios (see below). Cash Flow Modeling We modeled the transaction on a lease-by-lease basis to simulate a stress scenario commensurate with the assigned preliminary ratings. The results show that the preliminary rated notes are enhanced to the degree necessary to withstand a level of stressed credit, residual, and waived payment losses that are consistent with the assigned preliminary ratings. The class A notes can withstand a cumulative credit loss of 3.25%-4.25% (or approximately 5x our expected loss range), residual losses of 18.4%, and a waived payment loss of 0.34%, all as a percentage of the initial securitization value (see table 7). The class B notes can withstand a cumulative net credit loss of 2.92%-3.82%, residual losses of 16.0%, and a waived payment loss of 0.30%, all as a percentage of the initial securitization value. Table 7 Cash Flow Assumptions And Results Class A Class B Scenario (preliminary rating) AAA (sf) AA+ (sf) Cumulative net loss range (%) Cumulative net loss timing (mos.) 12/24/36 12/24/36 Cumulative net loss (%) 40/80/100 40/80/100 Voluntary prepayments (%) Recoveries (%) Recovery lag (mos.) 4 4 Residual haircut Total residual haircut as a % of the MSRP(i) Total residual haircut as a % of the undiscounted base residual value Vehicle return rate (%) Nondefaulting leases (%) Residual realization lag (mos.) 2 2 Waived payment stress as a % of the securitization value (%) Result Standard & Poor's stressed credit, residual, and waived payment loss as a % of the securitization value Approximate credit enhancement as a % of the securitization value (i)after adjustment for the vehicle return rate and nondefaulting lease rate. MSRP--Manufacturer's suggested retail price. In our cash flow scenarios, we applied appropriate stresses for a possible floating-rate note issuance. We assumed the maximum class A-2b floating-rate issuance and applied our one-month LIBOR high-path vector as the unhedged interest rate for each rating category. APRIL 16,

17 Sensitivity Analysis In addition to running stressed cash flows to analyze the amount of credit, residual, and waived payment losses that FCALT 2015-A can withstand, we ran a sensitivity analysis to determine how credit, residual, and waived payment losses in line with a moderate stress scenario, or a 'BBB' rating stress, could affect the preliminary ratings on the notes. According to our ratings stability criteria, we will not assign preliminary 'AAA' or 'AA+' ratings if we anticipate that the ratings would decline by more than one rating category in the first year during a moderate stress scenario. We will also not assign preliminary 'AAA' or 'AA+' ratings if we anticipate that the ratings would decline by more than three rating categories in a three-year horizon under moderate stress conditions. In our view, under the 'BBB' moderate stress scenario, all else being equal, we would expect our ratings on the class A and B notes to remain within one rating category of the assigned preliminary ratings in the first year and remain within three rating categories of the assigned preliminary ratings over a three-year horizon (see chart 5). Chart 5 APRIL 16,

18 Money Market Tranche Sizing The proposed money market tranche (the class A-1 notes) has a 13-month legal final maturity date (May 15, 2016). To test whether the money market tranche can be repaid by month 13, we ran cash flows using assumptions to delay the principal collections during the 13-month period. In our cash flow run, we assumed zero defaults and a zero absolute prepayment speed on all leases. We also stressed the recognition of the monthly lease payments and base residual amounts by applying a lag of one and two months, respectively. Based on our cash flow runs, approximately 10 months of collections would be sufficient to pay off the money market tranche. Legal Final Maturity To test the legal final maturity dates set for the longer-dated tranches (i.e., classes A-2a/A-2b, A-3, A-4, and B), we determined the date on which the respective notes were fully amortized in a zero-loss, zero-prepayment scenario and then added six months to the result. We also looked to see when these notes were paid off in our stressed cash flow scenarios. In addition, we ran a break-even stress cash flow scenario assuming that the available credit enhancement is used to cover losses and looked to see when the class A-2a/A-2b, A-3, A-4, and B notes were paid off under this scenario. In all of our cash flow scenarios, we confirmed there is sufficient credit enhancement to both cover losses and repay the related notes in full by their legal final maturity dates. Ford Credit Ford Credit, one of the largest auto finance companies in the U.S., was established in 1959 to provide financing for Ford vehicles and support Ford dealers. Ford Credit, headquartered in Dearborn, Mich., is Delaware limited liability company and is a wholly owned captive finance subsidiary of Ford Motor Co. Ford Credit offers a wide variety of automotive financing products including retail installment sale contracts and leases, business loans, and lines of credit to dealerships that sell Ford Motor Co. products. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties, and enforcement mechanisms available to investors and a description of how they differ from the representation, warranties, and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at APRIL 16,

19 Related Criteria And Research Related Criteria 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 Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014 Methodology And Assumptions For Ratings Above The Sovereign--Single-Jurisdiction Structured Finance, Sept. 19, 2014 Counterparty Risk Framework Methodology And Assumptions, June 25, 2013 Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 U.S. Interest Rate Assumptions Revised For May 2012 And Thereafter, April 30, 2012 Revised General Methodology And Assumptions For Rating U.S. ABS Auto Lease Securitizations, Nov. 29, 2011 General Methodology And Assumptions For Rating U.S. Auto Loan Securitizations, Jan. 11, 2011 Methodology: Credit Stability Criteria, May 3, 2010 Understanding Standard & Poor's Rating Definitions, June 3, 2009 Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Assessing The Risk Of Pension Plan Terminations On U.S. Auto Lease Securitizations, Aug. 17, 2004 Related Research Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of Macroeconomic Factors On Credit Quality, July 2, 2014 Research Update: Ford Motor Co. And Core Subsidiary Assigned 'A-3' Short-Term Issuer Credit Rating; Commercial Paper Assigned 'A-3' Debt, June 27, 2014 Ford Motor Credit Co. LLC, March 14, APRIL 16,

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