Approximately $1.4 billion of asset-backed securities rated
New York, January 25, 2021 -- Moody's Investors Service, ("Moody's") has
assigned definitive ratings to the notes issued by Ford Credit Auto Lease
Trust 2021-A (FCALT 2021-A). This is the first auto
lease transaction of the year for Ford Motor Credit Company LLC (FMCC,
Ba2, negative). The notes will be backed by a pool of retail
automobile lease contracts originated by FMCC, who is also the servicer
and administrator for the transaction.
The complete rating actions are as follows:
Issuer: Ford Credit Auto Lease Trust 2021-A
$179,000,000, 0.15602%, Class
A-1 Notes, Definitive Rating Assigned P-1 (sf)
$515,000,000, 0.19%, Class
A-2 Notes, Definitive Rating Assigned Aaa (sf)
$456,250,000, 0.26%, Class
A-3 Notes, Definitive Rating Assigned Aaa (sf)
$99,750,000, 0.30%, Class
A-4 Notes, Definitive Rating Assigned Aaa (sf)
$86,840,000, 0.47%, Class
B Notes, Definitive Rating Assigned Aa1 (sf)
$66,520,000, 0.78%, Class
C Notes, Definitive Rating Assigned Aa2 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral and
its expected performance, the strength of the capital structure,
and the experience and expertise of FMCC as the servicer and administrator.
Moody's expected median cumulative net credit loss expectation for FCALT
2021-A is 0.50% and the total loss at Aaa stress
on the collateral is 21.00% (including 3.50%
credit loss and 17.50% residual value loss at a Aaa stress).
The total loss at a Aaa stress of 21.00% is unchanged from
the 2020-B transaction, the last transaction we rated.
Moody's based its cumulative net credit loss expectation and loss at a
Aaa stress on an analysis of the quality of the underlying collateral;
the historical credit loss and residual value performance of similar collateral,
including securitization performance and managed portfolio performance;
the ability of FMCC to perform the servicing functions; and current
expectations for the macroeconomic environment during the life of the
transaction.
At closing, the Class A notes, Class B notes, and Class
C notes are expected to benefit from 23.20%, 17.85%,
and 13.75% of hard credit enhancement, respectively.
Hard credit enhancement for the notes consists of a combination of overcollateralization,
non-declining reserve account and subordination, except for
the Class C notes, which do not benefit from subordination.
The notes may also benefit from excess spread.
The COVID-19 outbreak, the government measures put in place
to contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Our analysis has considered the effect on the performance of auto leases
from the current weak US economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. Specifically, for US Auto lease deals,
the softening of the used car market will impact residual value performance
on leases. In addition, performance will weaken due to the
unprecedented spike in the unemployment rate, which may limit lessees'
income and their ability to make lease payments, also a credit negative.
Furthermore, lessee assistance programs such as lease deferrals
and extensions may adversely impact scheduled cash flows to bondholders.
As a result, the degree of uncertainty around our forecasts is unusually
high.
We regard the COVID-19 outbreak as a social risk under our ESG
framework, given the substantial implications for public health
and safety.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Auto Loan- and Lease-Backed ABS"
published in December 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1202515.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the subordinated notes if, given current expectations
of portfolio losses, levels of credit enhancement are consistent
with higher ratings. In sequential pay structures, such as
the one in this transaction, credit enhancement grows as a percentage
of the collateral balance as collections pay down senior notes.
Prepayments and interest collections directed toward note principal payments
will accelerate this build of enhancement. Moody's expectation
of pool losses could decline as a result of a lower number of obligor
defaults or appreciation in the value of the vehicles securing an obligor's
promise of payment. Portfolio losses also depend greatly on the
US job market, the market for used vehicles, and changes in
servicing practices.
Down
Moody's could downgrade the notes if, given current expectations
of portfolio losses, levels of credit enhancement are consistent
with lower ratings. Credit enhancement could decline if excess
spread is not sufficient to cover losses in a given month. Moody's
expectation of pool losses could rise as a result of a higher number of
obligor defaults or deterioration in the value of the vehicles securing
an obligor's promise of payment. Portfolio losses also depend greatly
on the US job market, the market for used vehicles, and poor
servicing. Other reasons for worse-than-expected
performance include error on the part of transaction parties, inadequate
transaction governance, and fraud. In our analysis of the
Class A-1 money market tranche, we applied incremental stresses
to our typical cash flow assumptions in consideration of a likely slowdown
in borrower payments brought on by the economic impact of the COVID-19
pandemic. Additionally, Moody's could downgrade the Class
A-1 short-term rating following a significant slowdown in
principal collections that could result from, among other things,
high delinquencies or a servicer disruption that impacts obligor's payments.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1261090.
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Toms Zachariah
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Daniela Jayesuria
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
