Agos Ducato marketing €895m in consumer-loan backed bonds

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Italian lender Agos Ducato S.p.A., a unit of Crédit Agricole S.A. , is sponsoring its 14th securitization of consumer loan originations totaling €895 million (US$1.05 billion).

The Sunrise SPV 20 S.r.l. transaction involves 124,768 loans secured by vehicles, furniture, and personal loan purchases, and includes a 12-month revolving period during which additional collateral that meets minimum pool criteria can be acquired. The loans have an average balance of €7,173 and a weighted average interest rate of 7.2%, according to presale reports.

The largest portion of the collateral (75%) involves unsecured personal loans, which have historically higher default rates than most other consumer loan products, according to Moody’s Investors Service. In addition, 75% of the loans have flexible payment options allowing debtors to postpone up to five installments during the life of the loan.

The loans, which have been seasoned an average of six months, have remaining terms of 6.4 years.

The €582.1 million in Class A notes are rated Aa2 by Moody’s and AA (high) by bond rating agency DBRS.

The A notes have a 35.2% credit enhancement, as measured by Moody’s; DBRS puts the CE at 35.6%. This consists of the subordination of four classes of junior notes, annualized excess spread of 4.8% and a 0.5% initial cash reserve account.

Moody’s expects cumulative defaults to reach 7.5% over the life of the deal, and recoveries of 10%.

Agos has entered into a fixed-floating interest rate swap arrangement with Credit Agricole to hedge the interest-rate risk between the fixed-rate loan collateral and the Class A notes that are based on the one-month Euribor rate.

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