Two auto loan securitizations from AmeriCredit Financial Services and Bank of the West launched Thursday.
AmeriCredit Financial Services, the subprime lending subsidiary of General Motors Financial, is marketing a $1 billion of bonds backed subprime auto loans.
AmeriCredit Automobile Receivables Trust 2015-4 will issue three tranches with preliminary ‘AAA’ ratings from Fitch Ratings: $335 million of notes are structured with a final maturity of April 2019 and $202.17 million of notes are maturing in July 2020. Both tranches benefit from credit enhancement of 34.7%.
This is the sponsor’s fourth deal of this year, and the credit quality is consistent with that of the previous three. It is backed largely of by loans with extended terms; those with terms of more than 60 months account for 90% of the collateral.
AmeriCredit isn't the alone; Santander also increased the percentage of longer term loans (73-75 months) in SDART 2015-5, completed on Oct. 9, to 15.20% from 8.28% in its previous deal. And Exeter Finance’s Exeter Automobile Receivables Trust 2015-3, completed the same week in October, was backed by a pool largely (90%) extended-term loans.
Longer-term loans typically have higher loss severity, as loan amortization trails vehicle depreciation, exposing the transaction to higher loss severity if the obligor defaults.
Somewhat mitigating this risk for AmerCredit’s latest deal is the fact that the long-term loans were used exclusively to finance new, as opposed to used, vehicles.
The loans pay a low annual interest rate, relative to the two other subprime auto deals done this month, of 12.88%. For example Santander's SDART 2015-5 pools was backed by loans that pay an annual interest rate 0f 16.30%.
The weighted average FICO score of the AmeriCredit 2015-5 pool is 563, down from the 2015-3 transaction but within range of recent transactions. The weighted average loan to value ratio of 111% is generally consistent with prior AMCAR transactions. Fitch noted in its presale report that LTVs above 100% could expose the trust to higher losses stemming from increased loss severity and potentially weaker recoveries. However, LTVs greater than 100% are typical for subprime collateral.
Wells Fargo Securities is the lead manager.
GM Financial’s auto loan portfolio has continued to grow, hitting $17.02 billion at September 30, 2015, up from $12.67 billion the prior year. Total delinquencies as a percentage of the portfolio were at 8.2% in September 2015, down from 9.2% a year earlier.
Bank of the West has also increased the number of loans with longer terms in its latest $750 million securitization, BWSTA 2015-2.
The deal pools prime auto loans that finance a mixture of new and used cars. More than 26% of loans are structured with 79 to 84 month original terms. Moody's Investor's Service said in the presale report that this is a much higher percentage than those of recent prime auto loan securitizations.
Longer term loans, are still considered riskier when made to high-quality borrowers. Moody’s cumulative net loss expectation for the BWSTA 2015-2 pool is 0.65%.
The pool also has a slightly weaker weighted average FICO of 768, compared with 774 in the sponsor’s previous deal, 2015-1; however FICOs is the pool are still high relative to other recent prime auto loan deals.
Moody's assigned 'Aaa' ratings to three tranches of class A notes: $200 million of notes mature on June 15, 2018; $237.5 million of notes mature on April 15, 2020 and $96.1 million of notes mature on June 15, 2021.
At the subordinate level the trust will also offer $10.6 million of 'Aa3' rated class B notes that mature on July 15, 2021; and $10 million of 'A2' rated class C notes that mature on Oct. 15, 2021