CarFinance Capital is planning a $235.2 million of bond backed by subprime auto loans, according to a presale report published by Kroll Bond Rating Agency.
Kroll has assigned preliminary ratings to five classes of notes to be issued by the deal, CarFinance Capital Auto Trust 2014-1: a AA- rating to $168 million the class A notes with credit enhancement of 32%; an A’ rating to a $38.4 million class B notes with credit enhancement of 16%; a BBB+’ rating to $13.32 million of class C notes with credit enhancement of 10.45%; a BBB- rating to $10.08 million of class D notes with credit enhancement of 6.25%; and a BB’ rating to $5.4 million of class E notes with credit enhancement of 4%.
As of Feb. 28, the deal was backed by approximately $192.2 million of loans. However the transaction includes a prefunding feature that allows up to 20% of the collateral pool to be purchased up to July 1, 2014.
This transaction represents the CarFinance’s first securitization of 2014 and its fourth securitization overall, according to the presale report. CarFinance’s inaugural securitization in August 2012 was a private, unrated term securitization totaling $160.25 million which has since been repaid. The company completed two additional securitizations in 2013 for a total of $542.23 million.
Among the deal’s weaknesses, Kroll noted that CarFinance has been originating loans since May 2011 and thus has only 33 months of performance data. However, it said that this 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.
Compared with earlier transactions, the latest deal is backed by a higher amount of direct originated loans, which tend to have lower coupons and higher loan-to-value ratios than indirect loans. Also, the latest deal is not as highly concentrated in the top three states and used vehicles. As a result credit enhancement levels are lower on all of the notes except the Class E notes, which remain the same as the last deal.