A pool of auto loans, largely extended to borrowers with subprime credit quality, will secure some $624.5 million in asset-backed securities from the Exeter Automobile Receivables Trust 2022-6.
Citigroup Capital Markets is the lead underwriter on the transaction, which operates through a trust that will repay the notes sequentially, beginning with the class A-1 notes, according to a pre-sale report from Fitch Ratings. The subordinate classes of notes will be shut out from principal payments until the principal amounts of all classes of the more senior notes are paid in full.
Exeter Finance is the sponsor, originator, servicer and administrator on the deal. Should Exeter Finance fail to uphold its obligations as servicer, then Citibank will step in as the deal's backup servicer, according to the rating agency.
The underlying collateral has on a weighted average (WA) basis, a FICO score of 579, a loan-to-value (LTV) ratio of 114.7%, and a WA annual percentage rate of 20.78%, according to Fitch. Almost the entire portfolio of 31,635 loans, 98.78%, is financing used cars.
On average, the loans have a current principal balance of $21,865, with a WA original loan term of 73 months.
Fitch did raise a concern about the APR in the collateral of the deal, which is also called EART, 2022-6. Loans with higher APRs are subject to higher rates of default. Should the pool experience higher default rates, then it could also reduce the pool's weighted average coupon (WAC). That could, in turn, reduce excess spread available to cover losses.
Fitch says that its base case cumulative net loss proxy is 19.0%, up from 18.7% for the previous deal, EART 2022-5.
Initially, the notes benefit from hard credit enhancement of 59.1%, 44.1%, 31.0%, 20.0%, and 10.7% on classes A, B, C, D and E, respectively. This falls in line with the range of previous transactions and the more recent EART 2022-5.
Fitch expects to assign ratings of 'F1' to the $45 million, class A-1 notes. Also, the A-2 and A-3 notes expect to receive 'AAA' ratings; and the rating agency expects to assign ratings of 'AA' on the class C notes through 'BB' E notes.