Auto ABS pipeline primed with new Ford, Toyota, Ally deals
Ford Motor Credit, Ally Bank and Toyota Motor Credit Corp. are adding up to $4 billion in new asset-backed bonds to the fledgling 2018 prime auto loan securitization pipeline.
Each lender is pooling in excess of $1 billion in bonds, in the largest pools that each has conducted in recent ABS offerings. Ally, for instance, is offering a $1.11 billion pool of prime receivables larger than any its platform trust has issued since 2014.
Toyota Motor Credit (TMCC) could potentially match its $1.75 billion bond sale of retail loans from last November if it chooses to upsize its proposed $1.25 billion offering, depending on market conditions, according to presale reports.
The three initial pools total $3.46 billion, but could total $3.96 billion if Toyota’s upsizing takes place.
Toyota Auto Receivables 2018-A Owner Trust
TMCC’s new deal pooling retail auto loans it originated for U.S. Toyota and Lexus franchise dealers is composed almost entirely of senior notes, similar to most of its recent asset-backed securities sales.
The senior tranches include a money-market series making of 25% of the collateral of either proposed pool size — either $314 million in the $1.25 billion pool or $440 million in the upsized pool. The one-year notes carry the highest short-term rating from both Moody’s Investors Service (P-1) and S&P Global Ratings (A-1+).
The $1.25 billion pool would have a Class A-2 tranche of two-year fixed- and floating-rate bonds set at $425 million; a $370 million in Class A-3 series notes due May 2022, and a five-year A-4 notes class totaling $109.8 million. The smaller pool would be secured by receivables on 75,540 loans totaling $1.37 billion.
If upsized to $1.75 billion, the pool of assets would support $595 million in Class A-2 notes, $518 million in A-3 notes and $153.3 million in the Class A-4 tranche, secured by 105,677 loans totaling $1.9 billion.
The upsized notes would carry the same maturities, and both pools carry preliminary triple-A ratings from Moody’s and S&P on the Class A notes.
The A notes also supported by 2.75% credit enhancement (made up of 2.5% surbordination and a 0.25% non-declining reserve fund). Overcollateralization will initially be at zero, but will build to a target of 0.85% of the initial adjusted pool balance.
Each pool has similar strong credit quality: a weighted average FICO of 760 and borrower APR of 2.15% for contracts mostly on new vehicles (79% of each collateral pool). However, Toyota is falling in line with most lenders who are underwriting rising percentages of riskier, long-term loans. About 50% of the loans are over 60 months, according to Moody’s, whereas four Toyota Auto Owner trust deals last year ranged from only 35%-45%.
By comparison, the first TAOT transaction in 2015 had only 25% of the pool consisting of longer-term loans.
The average remaining loan balance after an average 15-months seasoning is around $18,000.
The Plano-based TMCC, the highest-rated automotive captive finance firm in the country, has had 38 prior securitizations and will be the servicer and administrator for the transaction. TMCC has a managed portfolio of $52 billion, which has low net losses (0.54% in 2017) and delinquencies (1.97%).
The deal is being underwritten by MUFG.
Ford Credit Auto Owner Trust 2018-REV1
Ford Motor Credit’s new $1.09 billion revolving transaction of prime loans for trucks, SUVs and passenger cars has the auto maker boosting credit enhancement by 100 basis points to 10.5% from the 9.5% level of its previous transaction issued previous extended variable-utilization (Ford REV) transaction in September.
S&P cited the CE increase on the ballooning size of the $1 billion Class A notes size, which is creating higher subordination against the Class B notes totaling $51.9 million and Class C notes totaling $41 million. The deal also includes a longer seven-year revolving period Ford sought to add new collateral to the deal, compared to five years in the 201702 Ford REV deal.
The CE level is almost twice that of Ford’s most recent static pool of prime auto loans issued last November.
S&P and Moody’s have each assigned triple-A ratings to the Class A tranche of notes with a legal 13-year maturity.
The deal is Ford’s ninth transaction issued through the revolving shelf.
S&P has assigned a cumulative net loss expectation of between 2.5 and 2.85% based on the variable composition tests over the life of the transactions. Moody’s CNL estimate is 1.75% if the deal meets both credit enhancement and pool composition tests; 2.25% if only the pool composition tests.
Ford’s losses on the REV program have had a historical loss range of between 0.7%-3%, with all the recent 2015-2017 transactions performing at the lower end of the range, according to Moody’s.
The total securitized amount of the loans is $1.53 billion through 56,832 contracts and an average APR of 740 (higher than prior securitization that an average 736 FICO on $1.94 billion in loans). The WA APR is 3.22%, on original terms of 66 months with eight months seasoning. The average remaining loan size is $26,995.
The lead underwriters on the deal are Bank of America Merrill Lynch, JPMorgan and TD Securities.
Ally Auto Receivables Trust 2018-1
Ally Bank’s largest prime auto-loan securitization in four years, and 35th overall, includes four senior-note classes, among them a $283 million money-market tranche with a short-term A-1 rating from S&P and F-1 from Fitch Ratings.
All the Class A notes benefit from 5.85% initial credit enhancement, which consists of 5.15% surbordination, 0.45% overcollateralization and a 0.25% non-declining reserve account.
The two-year A-2 notes and the four-year A-3 bonds have class sizes of $340 million, followed by a $94.07 million Class A-4 series due 2023. All of the senior notes carry preliminary triple-A ratings.
The subordinate tranches includes a $23.5 million Class B (rated AA+ by Fitch and S&P). The deal’s $19.6 million in Class C and $14.6 million in Class D notes will be retained for risk-retention purposes and for private placement.
Ally is including fewer loans with 73-75-month terms slightly, to 11.86% from 12%, according to a presale report from S&P.
The 69,471 loans in the pool have an average balance of $16,119 and WA original terms of 66.13 months. Over 70% are for new vehicles through General Motors and FCA North America (Chrysler) dealers.
Ally still predominantly finances General Motors vehicles, in legacy dealer relationships from its captive finance background with the automaker. The deal includes almost no subvened loans, due to its ineligibility for GM incentive programs now exclusively issued through GM Financial financing.
Ally’s managed portfolio had 2.33 million contracts as of Sept. 30, 2017, up 13% from the end of the third quarter in 2016. Net losses were 0.77%, up from 0.48% the year prior, whil 30-day plus delinquencies were up to 1.87% from 1.22%.
S&P has an expected CNL range of 0.95%-1.05%, unchanged from Ally’s 2017-5 deal. Fitch applied an expected 1.25% base case loss scenario to its analysis of the deal.
Lead underwriters are Barclays, Deutsche Bank and JPMorgan.