BBVA Compass, which has not tapped the securitization market since 1998, is making a big comeback. It's preparing bonds backed by auto loans with terms up to 84 months, according to Moody's Investors Service.
The loans backing BBVA Compass Auto Receivables Trust 2015-A have a weighted average term of 6.3 years. And loans with terms that are 73 months to 84 months make up 31.3% of the pool and loans with terms between 61 and 72 months make up 48% of the pool.
Other issuers that have recently securitized 84-month original term loans are Bank of the West, USAA, and SunTrust. Longer-term loans carry risks stemming from their slower amortization, which means that the borrower has "negative equity" or owes more than the car is worth, for longer. This means that investors are at risk of low recoveries for longer as well.
Most of the loans backing BBVA 2015-A finance new cars (61.4%) and on average they have an annual interest rate of 5.51%. The pool's weighted average FICO of 714 is on the lower end of the range relative to other prime bank auto ABS transactions. For example, in July USAA's Auto Owner Trust 2015-1 pooled loans with a weighted average FICO of 729 and in June SunTrust Bank's STAT 2015-1 had a weighted average FICO score of 745; however the deals had lower credit enhancement across the capital stack relative to the BBVA deal.
Moody's assigned preliminary ratings of 'Aaa' to three tranches of class A notes that benefit from 11.70% credit enhancement. The class A-2 notes are due December 2018; the class A-3 notes are due January 2020 and the class A-4 notes are due March 2021.
At the subordinate level the trust will offer 'Aa2' rated class B notes that are due June 2021 and benefit from 8.30% credit enhancement; and'A3' rated class C notes that are due August 2021 and benefit from 5.65% credit enhancement, Moody's will not rate the class D notes
Moody’s expects a cumulative net loss of 14.50% for the 2015-A asset pool. Credit Suisse is the lead underwriter.