AmeriCredit, Flagship pump $1.22B into subprime auto pipeline
Two midtier subprime auto lenders are adding a total of $1.22 billion to the securitization pipeline this week.
AmeriCredit Automobile Receivables Trust 2018-1 is a $1.1 billion series of notes backed by auto loans to subprime customers of franchised General Motors and independent dealers partnering with AmeriCredit, a subsidiary of GM Financial since being acquired by the automaker in 2010. It is the sponsor's first deal of the year.
The two senior note tranches include $350 million in split fixed/floating rate bonds due July 2021 and $268.6 million Class A-3 fixed-rate notes. All of the bonds carry preliminary triple-A ratings from S&P Global Ratings and Fitch Ratings. Credit enhancement of 35.2% is unchanged from AmeriCredit’s previous transaction in November.
The transaction, structured and led by BNP Paribas, also include a $181 million tranche of money-market notes with A-1+ (S&P) and F1+ (Fitch) and will three subordinate classes of six-year notes totaling $300.5 million.
S&P credits AmeriCredit with some improvement in borrower credit quality, including a higher percentage of loans (54.7%) from the company’s highest scoring internal tier of customers, compared to 50.3% last November. Borrowers from the lowest-scoring bucket decreased to just 4.9% from 6.33%.
But AmeriCredit is including more longer-term loans of 73-75 months (6.52% of the collateral), which have had historically higher delinquency rates. The deal also includes fewer loans on new cars, just 51.8%, down from 56.9% from the prior deal.
Even with additional high-internal credit scores in the pool, the average APR rose to 13.11% from 12.98%.
S&P’s expected loss range of 9.75%-10.25% is unchanged. Fitch has derived a net loss proxy of 10.5%, a decrease from early 2017 AmeriCredit pools due to what it considers an overall stronger credit profile.
Flagship Credit Auto Trust 2018-2
Flagship Credit Acceptance is wading into some riskier territory for its second asset-backed transaction of 2018.
According to presale reports, the $223 million Flagship Credit Auto Trust 2018-2 has a higher portion of indirect, dealer-originated loans than Flagship’s first 2018 ABS in February, and is distributing more accounts from borrowers with deeper credit woes.
The capital stack includes a $137.8 million Class A senior-note tranche with expected triple-A ratings from S&P, DBRS and KBRA.
Flagship, which has sponsored 23 previous ABS transactions, is not only reducing the level of direct loans in the pool (which typically have lower levels of delinquencies) but is also capping them to no more than 12% of the subsequent loans to be added to the transaction during the pool’s prefunding period.
The weighted average FICO of the 8,762 loans with a receivables balance of $180.7 million decreased to 590 from 593, “and the distribution is weaker,” S&P wrote. The percentage of loans with FICOs under 550 increased to 19.4% of the pool from 17.2%, and the with 650 or greater shrank to 8.9% from 10.6% from the FCTA 2018-1 transaction.
Other changes from Flagship’s earlier 2018 pool include a decrease in the weighted average loan-to-value ratio to 119.9% from 122.4% and a boost in the share of indirect loans through dealerships to 85.3% from 79.2%.
DBRS estimates a base-case loss expectation of 12.15% of the pool, within the net loss range projected by KBRA (12.05%-13.05%) and inside of S&P’s 12.5%-13% loss range.
The Class A bonds have initial credit enhancement of 41%, below that of recent transactions due to a rise in excess spread (9.77%) and subordination.
The loans were originated by Flagship and its online portal, CarFinance Capital.
Wells Fargo is the underwriter.