AmeriCredit is venturing out with one of the first subprime auto loan securitizations since word of the Department of Justice’s probe of underwriting practices.
The $1.055 billion AmeriCredit Automobile Receivables Trust 2014-3 (AMCAR 2014-3) will issue five classes of senior notes, including a $141 million money market tranche with a preliminary P-1’ rating from Moody’s Investors Service and four classes of longer-term notes with preliminary Aaa’ ratings; all five benefit from initial had credit enhancement of 34.07%.
BNP Paribas Securities, Credit Suisse Securities, Goldman, Sachs, and J.P. Morgan Securities are the lead underwriters.
The deal comes after General Motors and Santander disclosed this month that they were being targeted by the DOJ.
As a result of the probe, as well as recent higher market volatility, analysts at Bank of America Merrill Lynch have taken a more cautious view on spreads for subprime auto loan ABS in the secondary market -- especially subordinated class issued by trusts sponsored by smaller lenders. While senior notes of subprime auto ABS have not widened any more than the senior notes of prime auto deals over the past few weeks, BofAML is concerned about future “headline risk,” according to research published today.
“At a minimum, we expect spreads for subprime auto loan ABS to remain unchanged but would not be surprised to see further widening, as generally benign fundamentals are offset by the potential for increased regulatory actions,” the report states. “The combination may result in a pullback by the industry in terms of willingness to lend to consumers and the availability and costs of funding for the industry, at least until the media sifts through the data and conveys a fuller story on the trends in the industry.”
The credit quality of the loans backing AmeriCredit’s latest offering is in line with that of its two prior deals of this year, according to Moody’s. The pool’s weighted average internal score of 245 is four points higher than the weighted average score for the 2014-2 pool and “on the high end” of recent AMCAR transactions.
The weighted average LTV of 110% is in the middle of the 109% to 111% range for recent AMCAR transactions.
The weighted average APR of 12.07% for the 2014-3 pool is lower than the weighted average APR for the 2014-2 transaction.
The collateral in the 2014-3 transaction has lower weighted average seasoning than the 2014-2 transaction. This is because the 2014-2 transaction includes a small amount of receivables that were called from 2010 securitizations at less than 10% pool factor.