The vehicle pool for BMW Vehicle Owner Trust 2023-A (BMWOT 2023-A) includes 81% new vehicle loans, which have historically performed better than used-vehicle loans. That's up from 69% in the previous issue, BMW Vehicle Owner Trust 2022-A, in May 2022.
BMW light trucks account for 61.8% of the latest loan pool, while hybrid or electric vehicles are another 12.4%, according to Fitch Ratings. The pool, which is originated and underwritten by BMW Financial Services and BMW Bank of North America, also includes motorcycles and MINI automobiles.
Four classes of notes are being issued: A1, A-2, A-3 and A-4. The class A-2 notes will be split into fixed-rate class A-2a and floating-rate class A-2b notes at closing, according to S&P Global Ratings. The notes will have a weighted-average annual percentage rate of 4.37% with expected final maturity dates ranging from 2024 to 2029. The lead underwriter is TD Securities, according to the ASR deal database.
BMW Financial Services (BMWFS), a wholly owned subsidiary of BMW of North America, is sponsor and servicer for BMWOT 2023, which closes on July 18. Fitch believes BMWFS is a capable originator, underwriter and servicer for prime auto loan collateral.
BMWFS and BMW Bank of North America are the sellers. Mitsubishi UFJ Securities Co, TD Securities and Wells Fargo Securities are managers, and Citigroup Global Markets and U.S. Bancorp are co-managers.
According to S&P, BMWFS may upsize its $1.25 billion auto loan ABS, which references a $1.39 billion pool, to $1.5 billion, which references a $1.67 billion pool. BMWOT 2023-A will be the 17th retail auto loan securitization completed by BMWFS.
The $1.39 billion collateral represents a smaller loan pool than BMWOT 2022-A's $1.65 billion pool and a smaller number of vehicle loans (38,188 compared to 54,064), but higher principal balances (36,443 compared to $30,574).
At 4.37%, the pool's average APR is higher than BMWOT 2022-A's 2.81%, while its weighted-average FICO score is 787, just below 2022-A's 788. Fitch says that the average FICO score for the 2023-A pool is the second highest to date for the BMW auto loan platform — and that it indicates strong borrower credit quality.
Fitch has revised its 2023 asset performance outlook for the overall prime auto loan ABS sector to "deteriorating" relative to 2022, reflecting its expectation that the moderation seen in 2022 will continue into 2023, but that losses will remain below or in line with pre-pandemic levels.
Seasoning totals 12.8 months in BMWOT 2023-A, down from 14 months in 2022-A, but in line with historical levels for the platform, Fitch says. Seasoned pools may experience lower cumulative net losses than unseasoned pools, given that a portion of the expected cumulative losses would have been realized prior to securitization.
The collateral pool offers geographic diversity to protect against recessions and regional downturns, though five states represent 51.5% of the pool, up from 46.1% in BMWOT 2022-A.
The class A notes have a sequential-pay structure with total initial hard credit enhancement of 2.75%, which Fitch considers to be sufficient.
Fitch expects to assign an F1 rating to class A-1 and AAA to the other three classes, while S&P expects to assign an A-1 rating to class A-1 and AAA to the other classes.
