Avid Automobile Receivables Trust, 2021-1, is preparing to issue about $140 million in auto asset-backed securities, in a transaction peppered with risk factors, since the underlying loans are to subprime borrowers.
The majority of the loans in the collateral pool, which have an average balance of $14,994, is made up of borrowers who had filed for bankruptcy, and who had decided to purchase a vehicle before their cases had closed.
Chapter 7 and Chapter 13 make up about 48% and 31% of the borrowers in the pool, respectively, while non-bankruptcy borrowers make up 21% of the pool, according to Kroll Bond Rating Service.
On a weighted average (WA) basis, the interest rates on the loans is about 17.47%, and the loans have a WA FICO score of 537. Also, the loans have a WA original term of 70 months, with an average seasoning of 13 months, a credit plus. Just 4.21% of the vehicles are new, while the rest of the portfolio is made up of used vehicles.
Geographically, the underlying loan pool appears to be very diversified. Illinois accounts for the largest concentration by state, with just 13.82% of the overall pool, followed by Ohio, with 10.46% and Virginia, with 9.39%.
Despite the condition of the underlying collateral, and borrower situation, KBRA noted several credit strengths in the Avid Automobile 2021-1 ABS transaction. The rating agency noted that Avid has been profitable since its inception.
Originations jumped from $87.1 million in 2018 to $119.3 million in 2019, and then dipped to $93.9 million in 2020, KBRA said. Avid had been increasing originations across its bankruptcy and subprime products up until 2020. Fewer bankruptcy filings in 2020, a results of government stimulus support to consumers, resulted in a decrease in originations of about 27%, KBRA said. Consumers also exhibited more conservative spending during that time.
Avid’s financial condition is a credit positive has generated positive net income over the past several years, with $45 million in a syndicated line of credit with Park National Bank, with $3.4 million outstanding as of September 30, 2021. Avid also has a $90 million warehouse facility with JPMorgan Chase, which matures in November 2022; and a $50 million warehouse facility with Capital One, maturing in November 2022; with $20.3 million outstanding as of September 30, 2021.
KBRA expects to assign a ‘AAA’ rating to the $72 million, class A certificates; ‘AA’ to the $14 million class B certificates; and ‘A’ to the $20 million class C certificates.
