A bevy of auto loan securitizations have scurried into the market this week, including the first transaction for BMW of North America’s consumer loan originations in two years.
BMW Vehicle Owner Trust 2016-A is planning an initial $1 billion issuance of notes backed by nearly 40,000 loans originated by its BMW Financial Services subsidiary.
CarMax Auto Superstores is also forwarding a principal balance of $1 billion in used car loans for the third asset-backed transaction by its owner trust platform, while Nissan Motor Corp. is marketing its first bonds offering this year backing dealer inventory financing in a $750 million master trust receivables series.
The BMW, CarMax and Nissan deals have preliminary ratings from Fitch Ratings.
Earlier this week, World Omni Financial Corp. emerged with its annual securitization of auto leases.
BMW’s transaction is structured in a fully ‘AAA’-rated capital stack of Class A notes. A short-term one-year series of Class A-1 bonds totals $262 million, and a split series of fixed-rate and floating-rate Class A-2 notes are sized at $180 million apiece, each due in May 2019.
The largest tranche features Class A-3 notes maturing in November 2020 totaling $284 million, with the longest-term notes in the stack are the six-year, Class A-4 notes sized at $94 million.
Depending on market conditions, BMW could upsize the transaction to $1.25 billion, boosting each tranche size by a proportional amount.
BMW’s recent activity in the securitization market has been centered on auto lease receivables, with three U.S. deals in the past 18 months as well as collateralized pools of leases in Germany and China.
The BMW pool consists of high-quality loans averaging $27,360 with 2.77% interest rates, with most borrowings tied to new vehicles (64.3% of the pool). Many of the pool’s attributes are on par with other super prime collateralizations where the average borrower FICO score exceeds 760.
Honda’s Auto Receivables Owners Trust 2016-2 and Mercedes Benz Auto Receivables Trust 2014-1 also benefit from relatively light 2.75% credit enhancement, according to Fitch, and extended seasoning for the underlying assets – over 10 months for BMW, 11 months for Mercedes and 13 months for Honda.
Consistent with the 2014 deal, a majority of the loans were for new BMW and MINI vehicles (64.3% of the pool).
BMW is also securitizing more of the longer-term loans in its retail loan portfolio of $12.6 billion. Over the course of the last two securitizations, BMW has increased the percentage of longer term loans beyond five years to 40% of the pool. For its three prior transactions, BMW limited loans 61 months or more to only 16% of the securitizations in 2013 and to under 10% in both 2011 and 2010.
Delinquencies remain a negligible problem for BMW. Total delinquencies have increased slightly to only 1.6% thus far in 2016.
JPMorgan was the lead underwriter for the transaction.
CarMax Auto Owner Trust 2016-3 also has a five-tranche structure of ‘AAA’ rated senior notes, but includes three classes of smaller subordinated notes as well. A pair of three-year notes with fixed- rate and floating-rate features is sized at $158.5 million, while the Class A-3 notes due May 2021 total $340 million. The $104.5 million in Class A-4 notes are due 2022.
All have credit enhancement support of 6.6%.
Also included in CarMax’s transaction through Credit Suisse Securities are $28 million in Class B notes (rated ‘AA’), $20 million in Class C notes (‘A’) and $15.5 million in Class D notes (‘BBB’).
Like BMW, CarMax is considering boosting the size of the issuance under favorable market conditions.
CarMax’s ABS pools are almost entirely used cars (99.81% in 2016-3) sold to customers with base prime average FICO scores (703 for the latest deal). The 2016-3 deal includes 54,072 loans, with an average principal of $18,494 and an APR of 7.35%. More than 60% of the loans exceed five years.
Nissan Master Owner Trust Receivables is looking to sell $750 million in ‘AAA’-rated bonds in a single Class A-1 notes structure, backed by a revolving pool of dealer floorplan receivables from franchised Nissan dealers.
Over 91% of the receivables are for new-car purchases of Nissan and Infiniti brand vehicles, with 10% of the pool concentrated with AutoNation dealers selling both new and used vehicles.
Nissan’s five-year notes carry 19.41% credit enhancement, including a 19% overcollateralization cushion. The transaction includes a step-up of CE levels should the dealer monthly payment rate fall below 35%.
Fitch reports nearly all Nissan dealers are profitable as of early 2016, and the principal balance of loans to dealers in the highest-rated group A classification is 62.31%.