It's been a busy year for Ally Financial, but the auto lender appears to be slowing down. It's fifth securitization of 2017 is sized at $560 million, or about half as large as its four previous deals, which ranged from $1.02 billion and $1.12 billion.
Going forward Ally intends to rely more on bank deposits for financing its underwriting operations in autos as well as mortgages, executives have revealed in quarterly earnings reports. (The bank reported a $3.8 billion increase in year-over-year deposits in its third-quarter earnings report last month, and also that all retail activity is originated at the bank level).
The structure of the latest deal, Ally Auto Receivables Trust 2017-5, is little changed from recent transactions. There are five senior tranches, a money market tranche and three term tranches with preliminary triple-A ratings from Moody’s Investors Service and S&P Global Ratings. The Class A-1 short-term notes are sized at $142 million; the three-year Class A-2 notes total $170 million, as do the four-year Class A-3 notes while the class A-4 notes are sized at $46.6 million.
All four tranches are supported by 5.85% initial credit enhancement, that is targeted to reach 6.7% (unchanged from AART 2017-4).
The remaining subordinate classes (B,C, and D) totaling $28.84 million will be retained by the sponsor.
Deal was underwritten by Barclays, Citigroup, Deutsche Bank.
Of note, the estimated annual spread, or the difference between interest earned on collateral and paid out on the notes, decreased to 2.32% from 2.79%. The weighted average APR of the 35,136 contracts in the deal increased to 5.72% from 5.61%, as the average 737 FICO and 94% loan-to-value ratio of the collateral remained stable from the prior Ally transaction.
here is also a slightly higher proportion of longer term loans. More than 67% have terms greater than five years, and 12% are between 72-75 months. The average original term is 66 months. Seasoning is up slightly to 13.38 months from 13.29 months.
As in recent AART deals, Ally’s falling share of captive finance activity with GM dealers has cut into its level of subvented loans (Ally remains in Chrysler’s incentive finance program, and is a preferred lender for Mitsubishi Motors Credit of America). Just 3.6% of the loans in the pool are derived from discounted-APR contracts benefiting from manufacturer or dealer incentives, compared with 4.9% in the 2017-3 pool and 5.5% in the 2017-2 pool.
Subvented loans typically go to higher credit-quality borrowers and have historically lower default rates than non-subvented loans.
GM related vehicles have fallen to 43.09% of the collateral in the new pool, while Chrysler vehicles have grown to 17.6%. As recently as its 2016-2 transaction, GM cars and trucks comprised 61.8% of the pool.
Recent deals are sustaining higher-than-expected losses, according to presale reports. Moody’s has estimated a cumulative net loss expectation of 0.85% for the Aaa notes. S&P has an expected CNL of 0.95-1.05%.
Including the new 2017-5 transaction, Ally has tapped the securitization market for nearly $7 billion this year across its auto loan – both prime and subprime – and dealer floorplan securitization platforms. It has filed notice of a fourth floorplan transaction, which could push Ally toward nearly doubling the $4.8 billion in loan securitizations performed in 2016.