A pool of auto credit-linked notes will support $3.9 billion in asset-backed securities that deal sponsor Ally Bank will sell to investors through the Ally Bank Credit-Linked Notes 2025-B.
The deal will transfer risk to noteholders through a hypothetical guaranty related to the reference pool, which is composed of fixed auto installment contracts extended to prime quality borrowers, according to analysts at Moody's Ratings.
ABCLN 2025-B will sell the notes through nine tranches of class A through G notes, plus an R-R piece, Moody's said. All the notes have a Sept. 15, 2033 legal final maturity date, the rating agency said.
Class A-1R will release the bulk of the notes, with $3.4 billion, according to the capital structure.
ABCLN 2025-B's notes have several positive credit aspects, including the credit quality of the loans in the reference portfolio. On a weighted average (WA) basis, they have a FICO score of 753, and a seasoning of 17 months. They also have a WA loan-to-value (LTV) ratio of 103%.
J.P. Morgan Securities is the lead underwriter.
The transaction will make principal payments from cash proceeds from the initial sale of the notes, to be held in a collateral account with a third-party bank. ABCLN 2025-B also benefits from a line of credit issued from an eligible institution with a credit rating of at lease A2 or P1 by Moody's.
The line of credit is also sized to cover up to five months of missed interest payments in the event Ally defaults on its interest obligations. Payments could also be made if Ally Bank gets put into receivership or conservatorship.
Despite all the credit advantages, the deal has several potential credit challenges. For one the pro rata payment structure is subject to target credit enhancement levels. Payments to the subordinate certificates, though, are subject to performance tests.
The class A1R notes benefit from 12.5% in subordination, and levels range from that to 1.50% on the class G notes.
There is also a significant amount of high-LTV loans, specifically higher than 120%. They make up 19.9% of the pool, giving the pool a relatively high WA LTV of 103.4%, Moody's said.
Moody's assigned ratings ranging from Aaa on the A2 notes to B2 on the class F notes.
