CarMax is readying its third auto loan securitization of the year, according to Fitch Ratings.
The deal, called CARMX 2015-3, will offer $1 billion of securities backed by prime auto loans, bringing the issuer’s total issuance for 2015 to $3.2 billion.
The credit quality of the loans backing CarMax’s latest transaction is in line with previous transactions. However the pool has slightly increased the number of loans with terms greater than 60 month to 58.8% from 57.4% in the 2015-2 deal.
Longer terms allow customers to afford higher-ticketed vehicles by lowering monthly payments. The loans are riskier because borrowers spend a longer time underwater, owing more than the value of their car.
Despite the increase in riskier loans, CarMax decreased the initial hard credit enhancement for the class A, B and C notes compared with 2015-2 . The total initial hard CE in 2015-3 totals 6.70% for class A notes, 4.85% for class B notes and 2.85% for class C notes. The Class A, B and C notes for 2015-2 had credit enhancement at 6.95%, 4.95% and 2.85% respectively.
Fitch assigned preliminary ratings of F1+’ to the money market notes, due August 2016 and AAA’ ratings to three classes of senior notes on offer. The notes are structured with varying maturities: the class A-2 notes are due November 2018 the class A-3 notes are due June 2020 and the class A-4 notes are due March 2021.
At the subordinate level the trust will offer AA’ rated class B notes, due May 2021; A’ rated class C notes, due June 2021 and BBB rated class D notes due January 2022.
RBC Capital markets is the lead underwriter.