BMW Finance is securitizing the largest portfolio yet of Chinese auto loan receivables, according to Moody's Investors Service.
Sized at RMB3.5 billion ($549 million), Bavarian Sky China 2015-2 is the biggest Chinese auto loan deal by any sponsor since foreign-owned finance companies began securitizing loans last year. The first deal, sponsored by a subsidiary of Ford Motor Co. was issued on May 27, 2014 and was sized at RMB800 million ($125 million).
BMW's previous securitization of Chinese auto loans, completed in June, was sized at RMB2.3 billion.
The latest deal is backed by loans used to finance new cars. Most of the vehicles are BMW brand. BMW requires borrowers included in the collateral pool to make a minimum down payment of 20%; the weighted average down payment is about 33.5% of the total value of the loan and most of the loans are 17.82 months seasoned.
BMW underwrites loans in China to a proprietary credit scoring model as well as using the People's Bank of China's (PBOC) credit bureau information. The PBOC’s credit bureau collects data from nation-wide financial institutions, and reports positive and negative information for each individual. BMW also uses the National Citizen Identification Information Center system to verify that the identification numbers and names of individual borrowers match.
Moody's assigned preliminary 'Aa3' ratings to the class A1 notes; 'Aa3' ratings to the class A2 notes; and 'A2' rating to the class B notes. .
The notes benefit from several sources of credit enhancement including the subordination of the notes; a non-amortizing cash reserve that will be fully funded at closing with a balance equal to 1.00% of the initial portfolio size; and the presence of a full turbo payment structure, under which any excess amount -- collected after payment of the rated notes’ interest in each period -- will be used for early repayment of the notes prior to an event of default of the notes.