globalcapital.com | August 24, 2016
By Rev Hui
Ford Auto Finance (China) broke the pricing record for China auto ABS by quite a wide margin with its second transaction of the year – the Rmb3bn ($450m) Fuyuan 2016-2 Retail Auto Mortgage Loan Securitization.
Structurally not much has changed with Ford’s latest return to the China auto ABS market. It relied on the same three-tranche structure seen in its earlier outing in April, selling two floating rate tranches in the form of a Rmb2.584bn class A and a Rmb151m class B, while retaining a Rmb231m equity piece.
Brought to the market by sole bookrunner and lead main underwriter China Merchants Securities, both tranches were marketed over the People’s Bank of China’s one year benchmark lending rate of 4.35%.
The class A came with guidance of minus 1.75%-0.75% over, while the class B at minus 1.15%-0.15% over.
Final pricing for both portions came at the tight end for the issuer with the class A sold at minus 1.5% over, which translates to a final coupon of 2.85%. The class B, on the other hand, were fixed at minus 1.05% over, or a final coupon of 3.3%. The two tranches were sold at par.
This was a very aggressively priced transaction for Ford especially considering the average yield for China auto ABS is only 3.92%, according to data provided by China Securitization Analytics.
The pricing of class A, however, was particularly impressive as it nabbed the title for being the tightest priced floater in China auto ABS. All other floaters in the asset class came with a more than 3% handle prior to Fuyuan 2016-2.
ICBC and Standard Chartered (China) were joint underwriters, while BNP Paribas (China), BTMU (China), Citi Orient Securities, China Merchants Bank, HSBC and Mizuho Bank (China) were also members of the underwriting group.
Fuyuan 2016-2 is a static securitization of 40,668 auto loans extended by Ford to borrowers in China with a good level of geographical diversification spread across more than 30 cities and regions.
The pool has a weighted average remaining term of 27.45 months, which is similar to the 27.2 months in Fuyuan 2016-1. In addition, the weighted average down payment rate of 38.11% is also similar to the 37.76% recorded in the last transaction.
Credit enhancement comes in the form of subordination as well as an initial over-collateralization of Rmb34m, plus a liquidity reserve that will be fully funded at closing.
The class A has a scheduled maturity of July 26 2018 and is rated Aa3 (sf)/AA (sf) by Moody’s and S&P, respectively. On the other hand, the class B has a scheduled maturity of September 2018 and is rated A1 (sf)/A+ (sf).
Domestic rating agencies China Chengxin International Credit Rating and China Bond Rating have also rated the class A AAA/AAA and the class B AA/AA+.
Back to August 2016 Archive
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