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CarMax loss projections down slightly in its first 2020 ABS

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CarMax Auto Superstores is securitizing a “slightly improved” pool of prime auto loans in its first securitization of 2020, according to S&P Global Ratings.

That is prompting a lower loss projection by S&P compared to CarMax’ final 2019 asset-backed transaction.

The $1.2 billion CarMax Auto Owner Trust (CAOT) 2020-1 (which could be upsized to $1.5 billion) has a higher percentage of loans derived from CarMax’s strongest internal credit-scoring tier (53.6%), and a reduction in 60-month-plus term loans to 61.5% from the 62.5% level in CAOT 2019-4.

For the latest transaction, S&P projects a base-case cumulative net loss range of 2.15%-2.25%, slightly lower than the 2.2%-2.3% level from the $1.5 billion 2019-4 transaction that priced last October.

“Series 2020-1's slightly lower lifetime loss expectation reflects the slightly improved credit quality of the pool and is closer in quality to series 2019-2, which has the same expected original loss range,” according to S&P’s presale report.

Fitch Ratings has a base case CNL of 2.45%, similar to its assessment of the 2019-4 transaction last fall.

The specifics of the portfolio of 71,238 loans (or 92,022 if upsized) include a weighted average FICO of 710, a “conservative” loan-to-value ratio of 94.6% (according to Fitch), and an average loan balance of approximately $16,800 with an APR of 8.05%. The loans, almost all for used vehicles, have average terms of 66 moths and seasoning of 4.8 months.

About 41.4% of the loans are for passenger vehicles, 44.7% for sport utility/crossover models and 13.9% for light-duty pickup trucks.

Fitch and S&P have assigned AAA ratings to three classes of senior-term notes, including a $429 million Class A-2 tranche that will be split between fixed- and floating-rate notes.

A $225 million money-market tranche carries each agency’s highest short-term rating of A-1+ (S&P) and F1+ (Fitch).

CarMax’s managed portfolio of prime loans reached over 1 million contracts at the end of November, totaling $13.14 billion in balances – up from year-ago figures of 939,959 contract totaling $12.18 billion.

Delinquency levels are flat at 3.47%, and annualized net losses are 0.98%.

The deal was underwritten by BofA Securities.

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