The subprime auto ABS pipeline cleared $431 million of notes offered by CarFinance and American Credit Acceptance (ACA).
American Credit Acceptance, with more seasoned loans and longer operating history than CarFinance, achieved better pricing on its senior notes.
ACA priced its third subprime auto loan securitization of the year. The deal’s $200 million senior tranche, rated AA’ by Standard & Poor's and structured with a weighted average life of .85 years, priced at 70 basis points over the Eurodollar synthetic forward, with a yield of 1%.
The loans in the collateral pool have a weighted average FICO score of 539 and 51.16% of the loans have an original term of 61-72 months.
ACART 2014-3 is ACA’s ninth asset-backed transaction. The subprime auto finance company, headquartered in Spartanburg, S.C., was established in 2007. The company's quarterly static pool data includes over six years of performance for its loans. Based on the company’s unaudited financial statements, it had $1.3 billion in assets and $122 million in equity as of May 31, 2014.
The underwriters for ACA's deal are Wells Fargo and Deutsche Bank.
By contrast, CarFinance priced the $231 million CFCAT 2014-2 subprime auto ABS with the a 1.6-year, class A yielding 1.45%. The notes priced at a spread of 90 basis points over EDSF. Kroll Bond Ratings expects to rate the senior tranche AA-.'
The deal is backed by a pool of direct and indirect auto loans — 7,782 loans totaling approximately $155 million, as of June 30.
Compared to ACA, CarFinance is a relative newcomer to the subprime lending space. The lender has only been originating loans since May 2011 and the loans have only 37 months of performance data. However, KBRA said in a presale report that the lack of history is mitigated by CarFinance’s management team’s long history of originating and servicing subprime auto loans both at Triad Financial and at Fireside Bank.
The 2014-2 transaction represents CarFinance’s fifth securitization overall, according to the presale report. Compared to the issuer’s prior transaction, the 2014-2 deal is backed by a higher amount of loans originated under its direct program. These loans tend to have lower coupons and higher loan-to-value assessments than indirect loans underwritten by CarFinance.
The deals bring the year to date auto loan issuance volume to $42 billion, with subprime loans accounting for $12 billion.