Auto lenders launching up to $6B in new ABS offerings
New-issue prime and subprime auto securitization deals picked up this week, with four new bond offerings backed by auto-loan receivables totaling between $5.5 billion and $6.06 billion.
The transactions include a massive $2 billion credit-linked notes series from JPMorgan Chase on its recently launched auto-loan securitization platform, representing the second issuance by Chase since September when it re-entered the auto ABS sector for the first time in more than a decade.
The Chase Auto Credit Linked Notes Series 2020-2 involve bonds that represent a credit-risk transfer of a reference pool of underlying auto loans that will remain on JPMorgan’s books. The notes are unsecured general obligations of JPMorgan, with ratings directly linked to the JPMorgan’s own double-A corporate rating from Fitch Ratings.
Fitch issued a presale report Thursday that included preliminary ratings for approximately $220 million of five classes of subordinate notes, between AA and B. Fitch Ratings is not rating the $1.76 billion Class A tranche of certificates, which presumably will be AAA-rated by another ratings agency.
The capital stack also included an unrated retention tranche totaling $31.02 million.
The $2.01 billion reference pool includes 85,921 prime auto loans with an average current principal balance of $23,445 (the loans have an average seasoning of 18.3 months on original terms averaging 73.2 months). Nearly 61% of the loans are for new vehicles. The weighted average borrower FICO is 773.
Ford Motor Credit is launching its third securitization of prime auto loans of the year in a $1.05 billion bond offering which could be upsized to $1.3 billion, depending on market conditions. According to a presale report from S&P Global Ratings, Ford Credit Auto Owner Trust (FCAOT) 2020-C (Ford’s 15thABS transaction to be issued under its Reg AB II compliant retail shelf) is slightly weaker from a credit-quality perspective to Ford’s previous deal (FCAOT 2020-B).
A key change from the earlier deal are the inclusion of extended-term loans beyond 72 months; loans with original terms of 73-84 months are 9.75% of the asset pool. Longer-term loans over 60 months make up 69.82% of the pool, compared to 57.57% from FCAOT 2020-B.
Loans are more highly leveraged than the prior pool, with a loan-to-value ratio of 101.75% compared to 98.09% from the early deal.
The capital stack in the 2020-C transaction includes three classes of senior notes with early AAA ratings from S&P, as well as a Class A-1 money-market tranche with S&P’s highest A-1+ short-term rating.
Two subprime/near-prime issuers are also sponsoring new ABS deals. GM Financial’s AmeriCredit Automobile Receivables Trust 2020-3 – the 53rdsecuritization on the AmeriCredit shelf – is a $1.13 billion transaction with two classes of Class A term notes totaling $673 million assigned preliminary AAA ratings from DBRS Morningstar. The loans (average principal balance of $21,216) have weighted average original terms of 72 months and six months seasoning, with a WA APR of 12.1% for borrowers with an average FICO of 585. The pool is split nearly evenly between new vehicles (51%) and used (49%).
DBRS Morningstar’s expected cumulative net loss for the portfolio is 9.35%.
Also launching this week is a fourth issuance from Santander Consumer USA’s near-prime platform. The $1.35 billion Santander Drive Auto Receivables Trust (SDART) 2020-4 (which could be upsized to $1.62 billion) is collateralized by a $1.5 billion or $1.8 billion pool of loans from borrowers with a WA FICO of 611, which is unchanged from Santander’s prior deal through the SDART shelf.
The collateral pool is similar to the prior SDART 2020-3 transaction, with a WA FICO of 611, 1.8 months of loan seasoning and a new-vehicle share of 36.1% of the pool, according to Fitch. The percentage of extended terms loans over 60 months “remains elevated” at 91.7%. Loans are 72 months make up 15.3% of the pool, in line with SDART 2020-3.
The notes include a Class A-2 tranche split between fixed- and floating-rate notes totaling $386.82 million, and a Class A-3 offering of $175 million with preliminary AAA ratings from Fitch. A Class A-1 tranche for money-market investors has a short-term F1+ Fitch rating.
Fitch’s base-case credit net loss proxy is 18%.