Amidst uncertainty in the broader market, rising unemployment rates and weakening consumer credit positions, AmeriCredit boldly priced a $500 million offering of automobile receivables-backed securities last Monday, via AmeriCredit Automobile Receivables Trust.
Most notably, the transaction is primarily made up of subprime automobile loans, which have not garnered a meaningful investor base since the credit crisis began.
The deal was lead by Deutsche Bank Securities, Wachovia Securities and Barclays Capital.
Short-term paper priced at 100 basis points over Libor. The triple-A rated A-2 and A-3 notes have a one-year average life and a two-and-a-half year average life, respectively, with pricing at 400 basis points over Libor for the A-2 class and 500 basis points over Libor on the A-3 class of notes. The B and C tranches have been retained by AmeriCredit and pledged as collateral to secure borrowings under AmeriCredit's funding facility with Wachovia Bank.
The deal will have initial credit enhancement of 24.35% of the original receivable pool balance. This is an increase from the company's July 2008-A-F transaction, where the level was 18.5%, according to a Standard & Poor's presale report. The total required enhancement level builds to 34.10% of the then-outstanding receivable pool balance - an increase from 22.5% in the A-F transaction. The initial credit enhancement will also include a 2% cash deposit, according to the company.
This is AmeriCredit's first subprime senior/subordinate transaction since 2006. Interestingly, the deal uses a senior/subordinate structure as opposed to a bond-insurance structure, as seen in the company's 2008-A-F deal. This is because of the recent apparent collapse of the bond insurance paradigm, S&P said.
The transaction will utilize a true sale of the receivables from AmeriCredit to AFS SenSub Corp. AFS will then sell its acquired assets, through a true sale, to AMCAR 2008-1, a bankruptcy-remote, special-purpose entity, which will then pledge its interest in the receivables to the indenture trustee on the noteholders' behalf, S&P said.
Other changes from the A-F deal, according to S&P, include a decrease in excess spread to approximately 7.64% from 8.14%, and an increase in longer term contracts - contracts greater than 60 months - to 86% from 83%. There will also be an additional increase in seasoning to eight months from seven months.
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