AmeriCredit priced another auto ABS wrapped by Assured Guaranty Corp. Back in late March, the auto firm priced another $200 million offering that was insured by Assured as well.
The firm's latest $200 million, three-tranche offering is also, like its March deal, lead managed by RBS Securities.
The auto-backed transaction, AmeriCredit Automobile Receivables Trust 2010-B, is co-managed by Deutsche Bank Securities, JPMorgan Securities, Credit Suisse Securities and UBS.
Moody's Investors Service in its presale report on the deal cited the collateral characteristics of Series 2010-B, which are consistent with the characteristics of the auto firm's previous transactions, particularly the most recent deals.
Historically, AmeriCredit-sponsored offerings have performed within a loss range of around 7.5% to 20%, Moody's said. "AmeriCredit subprime ABS deals have weathered the most recent recession relatively well," analysts wrote.
For details on AmeriCredit's March transaction, please see link below from the ASR Scorecards database.
Value of the Wrap
After the firm priced its deal in March, sources said that the benefit of the wrap was not certain, but the company wanted to test the waters anyway for insured offerings. Between now and March, AmeriCredit also came to market with with a $600 million transaction that had a senior/subordinate structure called AmeriCredit Automobile Receivables Trust 2010-2.
But with the second wrapped deal for the company this year pricing successfully, there seems to be increased market acceptance for insured securitized offerings.
“This is the second public issue we have insured for AmeriCredit this year,” said Paul Livingstone, seniormanaging director in structured finance at Assured Guaranty. “The transaction’s attractive pricing and broad distribution reflects the increasing market acceptance of our guaranty.”
Standard & Poors in its presale for the 2010-B deal said that its ratings assigned to the notes reflect the rating agency's view of the financial guaranty insurance policy issued by Assured.
According to the AmeriCredit's press release on the deal (available via the link below), the initial credit enhancement will total 17% of the original receivable pool balance, which will build to the total required enhancement level of 24% of the then outstanding receivable pool balance. Meanwhile, the initial 17% enhancement will consist of 2% cash and 15% overcollateralization.
According to S&P, under this policy, Assured "unconditionally and irrevocably guarantees the payment of monthly interest, the amount necessary to reduce the class A notes to an amount equal to the outstanding collateral balance (to maintain parity), and the class A principal on the final scheduled maturity date."
Even though Assured, S&P said, is insuring the class A-1 notes, the rating analysts also evaluated these notes on a stand-alone basis. The preliminary 'A-1+' rating assigned to the class A-1 notes is based mostly on the deal's internal credit support, the cash flow projections, and the availability of a spread account amount at the legal final maturity date, the rating agency said.
The underlying transaction risk that Assured assumes for this AmeriCredit deal is consistent with an investment-grade underlying rating based on the deal's internal credit support, which comprises a spread account, overcollateralization, and excess spread. The rating also takes into account the timely interest and principal payments made under stressed cash flow modeling scenarios and AmeriCredit's extensive securitization performance history dating back to 1994.
Here's a link to AmeriCredit's press release about the Series 2010-B deal.
Acquisition by GM
AmeriCredit is also currently in the process of being acquired by General Motors Corp. On July 22, General Motors agreed to purchase AmeriCredit for around $3.5 billion in cash.
According to a Moody's report released over the past week, the acquisition, if completed, is modestly credit positive for AmeriCredit’s auto loan securitized deals since General Motors' acquisition would offer only marginal benefits to the transactions, which were already showing improved performance.
General Motors' ownership would reduce further servicing disruption risk, according to Moody's. The main reason that AmeriCredit ABS would benefit from the acquisition is because it would further limit the already-low risk that the auto would become insolvent and experience a servicing disruption over the life of its transactions, the rating agency said.
If the strength and size of AmeriCredit’s servicing platform rose, it would be even more likely to survive a bankruptcy. As the captive finance company for General Motors, AmeriCredit has greater growth potential as a result of General Motors' branding and possible support, Moody's said.
Any improvement in AmeriCredit’s corporate credit is not likely to affect auto loan deals. However, the benefit to AmeriCredit’s servicing platform will not considerably affect its auto loan ABS transactions since structural features of the offerings already insulate them from changes in AmeriCredit’s credit quality, according to Moody's.
A notable portion of the deals’ cash flows directly into lockbox accounts established for each individual deal under the control of the trustee, Wells Fargo Bank, which Moody's called financially strong and highly experienced.
Wells also serves as the warm back-up servicer for most of the outstanding deals. More recent offerings further incorporate a liquidity trigger, the breach of which would result in a termination event which, in turn, would require Wells to take over the servicing, Moody's said.
Furthermore, AmeriCredit ABS, like many other auto loan ABS transactions, have upgrade potential.
"AmeriCredit subprime ABS deals have weathered the most recent recession relatively well," Moody's analysts wrote.
Analysts added that as the transactions' performance stabilized and their credit enhancement built up, Moody's upgraded some 2005 and 2006 vintage securities.