CarFinance Capital is readying its second subprime auto loan securitization of the year, according to a presale report published by Kroll Bond Rating Agency.
The $230.5 million deal, CarFinance Capital Auto Trust 2014-2, will be backed by a pool of direct and indirect auto loans—7,782 loans totaling approximately $155 million, as of June 30.
Five tranches will be issued, including the $191.9 million class A notes, preliminarily rated AA- by Kroll. The notes will benefit from an initial hard credit enhancement of 20.0%. The $15.2 million class B notes were assigned A’ provisional ratings, and the $9.4 million class C notes received A- ratings, benefiting from 13.5% and 9.5% initial hard credit enhancement, respectively.
Among the deal’s weaknesses, Kroll noted that CarFinance has only been originating loans since May 2011 and thus has only 37 months of performance data. However, the rating agency 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.
Also, the 2014-2 transaction has a higher amount of loans originated under CarFinance’s direct program—which tend to have lower coupons and higher loan-to-value assessments than indirect loans—than lender’s previous deal, the $235.2 million CarFinance Capital Auto Trust 2014-1, which was completed in March. Kroll gave AA- ratings to the $168 million the class A notes of that deal, which had credit enhancement of 32%.
The 2014-3 transaction represents the CarFinance’s fifth 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.
CarFinance, a specialty auto finance company, was established in March 2011 and is headquartered in Irvine, Calif. CarFinance is wholly-owned by CF Capital Holdings.