AmeriCredit's next $821M subprime auto ABS dips in credit quality

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GM Financial’s AmeriCredit subsidiary is marketing $820.5 million in bonds backed by a pool of subprime auto loans from its servicing portfolio.

AmeriCredit Automobile Receivables (AMCAR) Trust 2019-2 is collateralized by $870.6 million across 42,247 loans, according to presale reports from Fitch Ratings and Moody’s Investors Service.

All of the loans were originated by AmeriCredit, which is one of the major issuers of “deep subprime” loans for U.S. auto buyers financing vehicles without credit history or who have problem credit. The weighted average FICO for the pool is 577, among the lowest of deals from subprime issuers like Santander Consumer USA or Consumer Portfolio Services.

Borrowers with FICOs greater than 600 in the pool are down to 36.2% from 38.2% in AmeriCredit’s first ABS transaction this year.

The average FICO among the borrowers is down from 582 in the previous deal rated by Moody’s (AMCAR 2018-3), a reflection of weakened credit metrics that prompted a 10% credit loss estimate by Moody’s for the new deal – an increase of 50 basis points assigned to the older deal.

Moody’s also reported that recent AMCAR securitizations have seen slightly higher-than-expected credit losses. In April, Moody’s increased loss expectations on two of AmeriCredit’s 2017-vintage deals based on the rising losses.

Fitch’s net loss proxy is 11%.

The loans in the pool represent new and used auto, truck and SUV subprime loans. The percentage of loans for passenger sedans in AMCAR deals have declined in recent years reflecting the shift toward higher truck and SUV sales with GM deals, according to Fitch, but they remain the predominant vehicle type in the 2019-2 pool with 40% of the pool’s collateral.

Loans over 60 months constitute 92.8% of the pool, consistent with recent pools but higher than the trust’s historical average as borrowers increasingly resort to six- or seven-year loans to finance higher-priced vehicles. The 73-to 75-month contracts in the pool total 14.1% of the collateral.

The triple-A rated senior term notes being marketed make up less than 50% of the deal’s notional value. AmeriCredit is marketing $245.9 million in Class A-2 notes due September 2022, split between fixed and floating rate tranches, plus a Class A-3 notes offering maturing in January 2024 sized at $182.6 million.

A $153 million money-market tranche is also planned, with a peak P-1 rating from Moody’s and F1+ from Fitch.

The senior notes benefit from 35.2% credit enhancement, similar to recent AMCAR transactions.

Four subordinate tranches are also wrapped into the capital stack: a $63.12 million Class B tranche (rated Aa1 by Moody’s and AA by Fitch) due July 2024; a single-A rated $78.35 million Class C tranche due April 2025; a $77.04 million Class B tranche (Baa2/BBB) due June 2025; and a $20.46 million Class E tranche due February 2027 with Ba2/BB ratings. The Class E notes will initially be retained by the trust.

AmeriCredit services a managed loan portfolio estimated at $36.3 billion, as of March 31. Total delinquencies have shrunk to 3.3%, compared to 5.7% in the first three months of 2018. Net losses are down to 1.4% from 2% in the same time frame.

Barclays, Wells Fargo, BNP Paribas and Goldman Sachs are the lead underwriters of the transaction.

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