Two auto loan securitizations priced this week, one from CarMax backed by prime loans and one form Foursight backed by non-prime receivables.
CarMax upsized its offering, CARMX 2015-2, by $165 million to $1.165 billion. Spreads were tighter than those of CarMax's previous deal, completed in February, despite the fact that the collateral backing the latest deal was slightly weaker.
The shorter dated, one-year, triple-A rated class A-2 A fixed-rate notes pay 29 basis points over the eurodollar synthetic forward curve and the floating-rate, triple-A rated class A-2 B notes pay 28 basis points over one-month Libor.
By comparision, the one-year fixed-rate, triple-A rated notes issued by CARMAX 2015-1 pay 35 basis points over the eurodollar synthetic forward curve.
The triple-A rated, 2.53-year, class A-3 notes of the latest deal pay 30 basis points over interpolated swaps, one basis point tighter than the previous transaction.
CARMX 2015-2, which was rated by Moody's Investors Service and Fitch Ratings, is backed by loans used to purchase used cars and light trucks originated by CarMax’s finance unit and serviced by another subsidiary. Compared with CARMX 2015-1, the weighted average (WA) FICO score of the pool decreased to 698, and the level of greater than 60-month loans increased to 57.4%. Longer-term loans are riskier because borrowers spend a longer time underwater, owing more than the value of their car. These loans also tend to be used by borrowers who are stretching to buy more car than they can afford.
Offsetting the additional risk in the latest deal, according to Fitch, is the fact that the initial hard credit enhancement for class A, B and C notes increased compared with the previous deal. Credit enhancement on the A notes rose to 6.95% from 5.75%; on the B notes to 4.95% from 3.5%; and on the C notes to 2.95% from 1.65%.
Meanwhile, Foursight Capital priced its $106 million nonprime auto loan securitization, FCRT 2015-1, the issuer’s second ever deal.
The issuer pays 155 basis points over eurodollar synthic forward on the 1.8-year, A’ , DBRS rated class A notes.
The transaction pools a mix of prime, near-prime and subprime auto loan receivables. The initial class A credit enhancement is 13.20%. Foursight finances recent-model low-mileage used vehicles and moderately priced new vehicles. Most of the transaction pool is comprised of loans that finance used vehicles (57.27%). The weighted-average (WA) annual percentage rate on the loans at origination was 10.36%. The pool has a WA FICO score of 637, a WA remaining term of 70 months.
Foursight, which is owned by Leucadia National Corp., is a relatively new entrant but it was established by former management from Franklin Capital Corp. (FCC), an active issuer of term ABS from 1998 to 2008. The issuer’s auto loan origination platform was created by replicating the former FCC platform, according to DBRS.
As of March 31, 2015, Foursight had a serviced portfolio of approximately 8,903 automobile loan contracts with an aggregate outstanding balance of over $194 million.
According to Standard & Poor’s., retail auto-loan ABS issuance for the year to date is $25.1 billion, including $13 billion of prime, $8.9 billion of subprime and $3.3 billion in nonprime securitization.
