CarMax is marketing its second auto loan securitization of the year, according to Fitch Ratings.
The $1 billion CarMax Auto Owner Trust 2015-2 will issue a money market tranche and four tranches of senior notes with preliminary AAA’ ratings from Fitch.
Barclays is the lead underwriter.
The deal is backed by loans used to purchase used cars and light trucks originated by CarMax’s finance unit and serviced by another subsidiary.
The credit quality of the collateral backing this deal is slightly weaker than that of CarMax’s previous four transactions, according to Fitch. The weighted average (WA) FICO score has decreased to 698, and the level of greater than 60-month loans has 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 this additional risk, according to Fitch, is the fact that the initial hard credit enhancement for class A, B and C notes has 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%.
The credit enhancement for the D notes, which are first in line to sustain losses, remains unchanged at 0.85%, however.
