AmeriCredit boosts credit metics (again) in latest subprime auto ABS

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AmeriCredit Financial Services' latest subprime auto loans boasts slightly higher credit metrics, continuing the trend seen in its past several deals.

Loans backing the $1.2 billion AmeriCredit Automobile Receivables (AMCAR) Trust 2018-2 have the highest weighted average FICO score (582) in the history of the AMCAR platform. The percentage of loans with FICOs over 600 (39%) is also a high watermark. Loan to value rations are also lower, at 106%.

Despite the better credit metrics, however, expectations for cumulative net losses are unchanged. Moody’s Investors Service sees them reaching 9.5% of the initial principal balance, unchanged from the last deal it rated in 2017, and Fitch at 10.5%, in its base-case scenario, unchanged from AmeriCredit’s first transaction of 2018.

The capital stack is also similar to that of previous deals. There are four senior tranches of notes, a money market tranche rated P-1/F-1 and three term tranches rated triple-A, two of them with three-year tenors and one with five years. All of the senior notes benefit from 35.2% credit enhancement — unchanged from the prior deal.

The three subordinate classes of notes being offered have six-year maturities: a double-A rated Class B $98.6 million tranche with CE of 27.95%; the single-A Class C notes sized at $122.4 million with 18.95% CE; and the triple-B (Baa2 by Moody’s) Class D notes totaling $120.4 million with CE of 10.1%.

There is also a $32 million Class E tranche of notes rated single-B rating by Moody's, but those notes (as in prior AmeriCredit deals) represent risk-retention stakes that will not be offered to investors. (Fitch assigned a double-B to the tranche).

According to S&P Global Ratings, American Credit Acceptance and several other subprime auto lenders have issued $141 million in single-B notes this year after selling none in 2017. S&P cites the “maturation” of the subprime market as well as the growth in independent auto-finance companies who need to maximize their bond proceeds representing their primary funding source.

AmeriCredit is on more solid ground, as a subsidiary of GM Financial and with a long ABS track record and a managed portfolio that has grown to $30.6 billion, up from $26 billion midway through 2017.

AmeriCredit’s tighter underwriting has reduced delinquencies 4.6% year over year through the second quarter, and net credit losses are down slightly to 1.8% from 2%.

Barclays, Deutsche Bank, Goldman Sachs and Wells Fargo are the deal's lead underwriters.

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