Several auto ABS deals are filling up the ABS pipeline as the asset class builds up momentum over the post-holiday week. Both the prime and non-prime auto loan ABS sectors are seeing activity.
One of the deals is GM Financial Consumer Automobile Receivables Trust 2021-3. GMCAR 2021-3 is backed by new as well as used automobile, light truck and utility vehicle loans that were originated and serviced by General Motors Financial Co. (GMF), according to a Fitch Ratings presale report. It is GMF’s 18th prime loan ABS deal.
Santander Drive Auto Receivables Trust 2021-3 is another issuer in the market. According to a Fitch presale report, this is the third series issued by Santander Consumer (SC) USA this year. The notes are backed by a pool of non-prime new and used automobile, light truck and utility vehicle loans originated and purchased by SC.
Meanwhile, another transaction this week is World Omni Automobile Lease Securitization Trust 2021-A. The deal will be backed by a pool of closed-end vehicle leases on new vehicles made by Toyota Motor Corporation and originated by World Omni Financial Corp., the servicer and sponsor of 2021-A.
Fitch says that the deal's residual value (RV) maturity profile is less concentrated compared to the past two deals, although it is more concentrated relative to prior pools. Accounting for this concentration risk as well as potential future wholesale vehicle market volatility, the rating agency used the historical worst nine months’ residual disposition losses in deriving its ‘BBsf’ RV proxy, in line with the 2020-B transaction.
JPMorgan Chase Bank’s fourth auto credit-linked note transaction called Chase Auto Credit Linked Notes, Series 2021-2 is also in the pipeline. The previous deal Chase Auto Credit Linked Notes, Series 2021-1 was issued in March 2021. The class A certificates will be retained by the issuer and are not rated by Fitch. The notes will be unsecured general obligations of JPMCB and directly linked to the Issuer's Default Rating. The deal will be serviced by JPMCB through its Chase Auto Finance Corp. unit, according to a Fitch presale.
Another deal is Foursight Capital Automobile Receivables Trust 2021-2. This is the second transaction of Foursight Capital this year and is backed by non-prime auto loans. based on a Moody's Investors Service presale report. The deal is backed by retail installment auto loan contracts that Foursight originated.
According to Moody's, one of the credit challenges for the deal include Foursight's unrated and financially weak position. The rating agency said that a deal with a financially weak servicer and sponsor causes increased variability to the expected loss scenario. The weak sponsor-servicer will probably be less able to limit non-collateral related risks on ABS bondholders' behalf. Additionally, if servicing is transferred to the backup servicer, the performance will probably suffer.
Moody's also said that the initial pool comprises non-prime quality auto loans that have a weighted average (WA) FICO of 648. Also, the concentration limits in the pre-funding period permit for a possibly worse pool versus previous deals.
KBRA, in its presale report, noted that Foursight buys insurance policies that cover certain near prime and subprime loans to cover any deficiency balance on the defaulted contract and the related vehicle's liquidation proceeds that the company calls Greenlight Loans. Any proceeds coming from those insurance policies would be treated as collections on the automobile loan contracts and deposited into a collection account according to the sale and servicing agreement.
