BMW Financial and Mercedes-Benz priced a combined $3 billion of securities backed by luxury auto lease receivables this week.
The $1 billion BMW Vehicle Lease Trust 2015-1 issued its triple-A rated, 2.04-year A3 tranche at swaps plus 40 basis points, while the 2.4-year A4 class was sold at swaps plus 37 basis points, according to a pricing document.
The 1.21-year class A2 notes floating-rate notes priced at 32 basis points over one-month Libor and the fixed-rate notes with the same term priced at 34 basis points over the Eurodollar synthetic forward curve.
Fitch Ratings and Moody’s Investors Service assigned preliminary ratings to the notes. J.P. Morgan is the lead underwriter.
Mercedes-Benz also priced its $2.01 billion MBALT 2015-A, according to a Reuters report. The deal was upsized from $1.39 billion, and the triple-A rated, 1.61-year A3 tranche priced at 41 basis points over Eurodollar synthetic forward curve. The 2.03-year A4 tranche priced at swaps plus 37 basis points.
Moody’s alone rated the Mercedes deal; Barclays, Citigroup and Credit Agricole were the lead underwriters on the deal.
Both deals are backed by a portfolio of leases on luxury cars. Historically, there has been more volatility in the losses realized when the manufacturer sells these vehicles at the end of the lease term.
BMW’s greatest residual loss was recorded at year-end 2008, when the issuer’s managed portfolio experienced losses of about 15.2%. Mercedes-Benz experienced its worst residual value loss over 2008-2009, with residual loss reaching the range of 13-21%.
Since 2011, however both companies have seen residual loss performance improve significantly.
In 2012, BMW’s portfolio registered a record gain of 11.6% and Mercedes-Benz saw a gain of 12.51%. This trend has cooled somewhat on the back of falling used car prices; for example in 2014 the BMW portfolio saw a 1.4% gain in residual value Mercedes-Benz saw a gain of 2.84%.