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Ally plans second 2019 prime auto-loan ABS issuance in $1.1B deal

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Ally Bank, which continues to increase origination volume and expand its dealer-partner network, is marketing $1.11 billion in bonds backed by prime auto loans in its second securitization of indirect new- and used-vehicle financing contracts of the year.

The $1.11 billion Ally Auto Receivables Trust (AART) 2019-2 deal has three classes of senior term notes with early AAA ratings by S&P Global Ratings and Fitch Ratings.

The $359 million in Class A-2 notes have a final maturity of July 22, while the similarly sized tranche of A-3 notes are due January 2024. A Class A-4 tranche is sized at $80.22 million, and due August 2024.

A Class A-1 money-market notes offering totals $260 million, with an F1+ short-term Fitch rating and an A-1+ from S&P. Three subordinate tranches totaling $52.13 million in notes are also being issued.

Deutsche Bank is the lead underwriter on Ally’s 39th prime retail auto transaction under the AART platform. Ally’s previous transaction, which totaled $1.06 billion, was launched at the beginning of the year and priced in February.

Ally, the retail bank arm of Ally Financial (NYSE: Ally), also sponsors securitizations of nonprime loans through its Capital Auto Receivables trust, which previously issued notes in October 2018.

The notes back 66,351 contracts with an average principal balance of $16,895, with a weighted average APR of 7% - the highest in recent years for an AART transaction. The loans are seasoned an average of 9.55 months, which is on the low end of historical Ally deals.

The auto lending business is a legacy of Ally Financial Inc.'s former standing as the original captive finance lender for General Motors, when it was known as GMAC. Although no longer holding preferred lender relationships with GM and Chrysler Group, Ally still maintains financing support to their dealers as an indirect lender. GM-related vehicles make 31.6% of the contracts, and Chrysler 16%.

Subvened loans benefitting from manufacturer subsidies provided to dealers as new-vehicle financing incentives have all but disappeared from Ally’s deals, now making up only 0.39% of the pool via U.S. dealers for Mitsubishi Motors and Aston Martin, for whom Ally holds preferred lender status.

S&P notes there were no structural or credit enhancement changes from the first AART deal this year. The weighted average loan to value ratio has decreased slightly to 93.2% from 93.4%, and the percentage of loans with extended terms of 61-75 months decreased to 66.85% from 67.96%.

CNL net loss range of 0.95%-1.05% is unchanged from prior AART transactions rated by S&P. Fitch has a base case cumulative net loss proxy of 1.25%.

As of March 31, Ally had 3.24 million outstanding contracts in its managed portfolio, which is now predominantly composed of used-vehicle contracts (1.97 million). The company had its highest-ever number of quarterly applications in the first quarter (3.2 million), leading to $9.2 billion in consumer auto originations in the first three months of the year.

Although the impact won’t be felt in the current transaction with an average seasoning of 9.55 months, Ally reported a quarterly decline in both delinquencies (0.48%) and net charge-offs (1.32%) in the first quarter, down 0.7% and 1.48% in the fourth quarter, respectively.

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