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