Bank of America car loan secure $917 million in ABS

Bank of America is preparing to raise $917.4 million in asset-backed bonds, through a 144A transaction secured by pool of loans that finance new and used automobile and light-trucks.

The deal, BAAT Auto Trust series 2025-1, has a super-prime underlying borrower base, as FICO scores exceeding 800 made up 55.2% of the pool, according to Fitch Ratings. Also, used vehicles accounted for a majority, 58%, of the pool, something that raised a little bit of caution with Moody's Ratings, which also assessed the deal.

On a weighted average (WA) basis, the loans have a coupon of 6.44%, and a remaining term of 50 months.

The deal structure will issue notes through five tranches. Legal final maturity dates range from April 20, 2026 on the A1 notes to Nov. 20, 2031 on the A4 notes, according to Fitch and Moody's. The notes benefit from total hard credit enhancement that equals about 3.75% of each notes' outstanding balance. There is also a reserve fund representing 0.25% of the pool balance, according to the rating agencies.

The A1 notes receive an F1+ rating from Fitch, while the rest of the tranches A2 through A4, are rated AAA. Meanwhile, Moody's assigned P1 to the A1 tranche of notes, and Aaa to the A2 through A4 classes of notes.

BofA's complete involvement in the deal, from loan originator, sponsor and led underwriter, lends a lot of confidence in the notes' timely repayment to investors, according to Moody's. And in addition to the pool's high credit quality, the deal benefits from a buildup in credit enhancement as the pool amortizes.

Even this deal had potential credit challenges, some of which stemmed from the proportion of used vehicles. Moody's observed that used vehicle loans generally perform more poorly than loans on new cars. That underperformance risk is mitigated, though, because BofA's used auto loans have been more comparable backed by new cars.