This securitisation transaction is structured to provide credit enhancement that increases the likelihood that the issuer will make timely payment of interest and principal on the Class A notes and the Class B notes and decrease the likelihood that losses on the receivables will impair the issuer's ability to do so. Credit enhancement may not provide protection against all risks of loss and does not guarantee payment of interest and repayment of the entire principal amount of your notes. If losses on receivables exceed the credit enhancement available, noteholders will bear their allocable share of the loss. The noteholders will have no recourse to FCE as a source of payment.
€3,875,250.00 or the liquidity component, which represents 0.71% of the aggregate original principal balance of the listed notes, and
€11,830,000.00 or the initial commingling component, which represents 2.17% of the aggregate net present value of the receivables as at the cut-off date.
No later than the payment date falling in October 2016, the seller will deposit an additional amount of€4,000,000.00 into the reserve account, being the additional commingling component. The initial commingling component and the additional commingling component together will comprise the commingling component.
The liquidity component is sized to cover six months of (i) issuer expenses, (ii) servicing fee, (iii) net payments under the swap agreement and (iv) interest margin on the listed notes. The issuer will only be entitled to use the liquidity component to the extent that collections on the receivables are insufficient to cover the fees and expenses of the issuer (including the servicing fee) and interest payments on the notes and net payments due to the swap counterparty (other than a subordinated termination payment). The issuer also will withdraw funds from the liquidity component to the extent needed to repay any class of notes in full on its final legal maturity date.
The issuer will only be entitled to use the commingling component to the extent that, following an insolvency event affecting the servicer, the servicer, having recognised the collections in its collection accounts, fails to repay such collections or any part of such collections into the issuer's account, in accordance with the terms of the servicing agreement.
If amounts relating to the liquidity component are withdrawn from the reserve account, the reserve account will be replenished in accordance with the interest priority of payments to the required level to the extent there are available collections on subsequent payment dates after all higher priority
payments are made. The issuer will repay the reserve amount to the seller upon the outstanding principal amount of the notes having been reduced to zero.
Investment earnings on amounts in the reserve account will be included in the available interest collections.
Subordination
This securitisation transaction is structured so that the issuer will pay interest to the Class A notes, and then will pay interest sequentially to the remaining classes of notes in order of seniority. The issuer will not pay interest on the Class B notes or Class C notes until all interest due on the Class A notes is paid in full.
The issuer will pay principal sequentially to each class of notes in order of seniority. The issuer will not pay principal on any class of notes until the principal amounts of all senior classes of notes are paid in full.
If the notes are accelerated after any event of default described under "Annex A: Terms and
Conditions of the Notes", the priority of payments will change and the issuer will not pay interest or
principal on any class of notes that are not part of the controlling class until the notes of the controlling class and the swap counterparty (except for a swap termination payment where the swap counterparty is the defaulting party or an additional termination event where the swap counterparty is the sole affected party) are paid in full. These subordination features provide credit enhancement to more senior ranking classes of notes with the Class A notes benefiting the most.
low APRs on these receivables, this securitisation transaction is structured to provide a certain amount of excess spread.
Excess spread for any payment date will be the amount by which collections of interest on the receivables during the preceding month exceeds the sum of the trustee, security trustee and collateral agent fees and expenses, the servicing fee, the net swap payments due to the swap counterparty (other than a subordinated termination payment) and the interest payments due on the Class A notes and the Class B notes for that payment date. The amount of excess spread will depend on factors such as the borrower rate on the receivables, the discount rate, interest rates on the notes,
prepayments and losses. Generally, excess spread provides a source of funds to absorb any losses on the receivables and reduce the likelihood of losses on the notes.
The purchase price paid for the receivables by the issuer to FCE is calculated on a discounted cash flow approach in order to provide the issuer with interest cash flows in excess of what is available through the regular interest collections on the receivables. The net present value of the receivables will be calculated by discounting each remaining monthly instalment on the loan at the greater of the borrower rate in the loan agreement and 3.9%. This has the effect of creating additional interest cash flow by reallocating a portion of the principal amount of each monthly instalment of a receivable to interest. The minimum discount rate is set by the issuer to achieve sufficient additional interest to satisfy the issuer expenses and may provide limited additional credit enhancement to absorb losses.
Furthermore, any excess interest collections, following the payment of interest on the Class B notes and the replenishment of the reserve account (if required), will be used to cover any losses on written-off receivables and any deficiency of payments of principal on the receivables.