First Help Financial is sponsoring a securitization of motor vehicle retail installment contracts, aiming to raise $153 million from the capital markets and paying principal sequentially, increasing enhancement as a percentage of assets as the pool amortizes and de-levers.
The transaction, First Help Financial Trust 2022-1, FHFT 2022-1, is First Help Financial’s fourth deal, and is a 144a transaction, according to Moody’s Investors Service, which is assigning ratings to an FHF Trust deal for the first time. Auto loans on new and used light trucks, minivans and sport utility vehicles are securing the notes.
Some 47.4% of the underlying pool was extended to consumers with either no credit score, or borrowers who had a weighted average (WA) FICO score of 665. The collateral assets have a loan-to-value ratio of 104%. Moody’s acknowledged that those borrower attributes—including the fact that FHF is a small, niche auto lender with less than $500 million in assets, adds variability to the expected loss scenarios—are credit challenges to the notes.
The rating agency expects to assign ratings of ‘A2’ to the $126.9 million class A notes; ‘A3’ to the $14.1 million class B notes and ‘Baa3’ to the $8.3 million class notes.
Credit support on the notes begins with 18.0%, 8.8% and 3.0% minimum initial hard credit enhancement on classes A, B and C respectively. While Moody’s believed that FHF was not strong as a servicer, due to its relatively small size and scant experience, it counts Vervent’s role as backup servicer as a credit strength.
From an ESG perspective, Moody’s noted that the short transaction tenor of FHF Trust, 2022-1, mitigate environmental and social risks. Environmentally, the short tenor is not likely to be material to the credit quality of the bonds. Socially speaking, the collateral obligors’ geographical diversity and the deal’s short tenor should protect the notes from risk of major losses.
What also works in the deal’s favor is its duration, according to Moody’s. The notes have a legal final maturity that range from January 2028 to June 2028.
Other forms of credit enhancement include over-collateralization, which will be 2% of the initial pool balance. This should build to a targeted OC level equal to either 5.5% of the current pool balance, or a non-declining 0.5% of the initial pool balance, whichever is greater.
