After its inaugural securitization of prime auto retail installment loans closed at the end of June, Citizens Bank is returning to raise $750 million in auto asset-backed securities.
J.P. Morgan Securities will manage the deal, for which S&P Global Ratings has an expected cumulative net loss (ECNL) of 1.0% on the class A notes, and a 2.0x loss level on the 'BBB' notes, the company said. Classes A-1 through A-4 have about 8.11% of credit enhancement coming from hard credit enhancement and a haircut to excess spread.
The deal will issue four classes of fixed-rate notes, which have legal final maturity dates ranging from Sept. 16, 2024 through Oct. 15, 2030, S&P said.
S&P expects to assign 'A-1+' to the class A-1 notes, and 'AAA' to the A-2 through A-4 notes.
Similar to the reasoning for its ratings assessment on CITZN 2023-1, S&P notes that Citizens is a wholly owned subsidiary of Citizens Financial Group, which has a stable credit outlook. The rating agency also pointed to Citizens Bank's decades of experience providing a range of banking products and services to both retail and commercial customers. As of yearend 2022, Citizens had $12.3 billion in total auto loan assets, out of a total $226.7 billion in assets.
As for the collateral underpinning the auto loans, S&P notes that borrowers had a weighted average FICO score of 770, among the highest of prime issuers, with a minimum of 660.
CITZN 2023-2 has a couple of structural changes from its previous deal, including a yield supplement overcollateralization (YSOC) that will be sized so that an effective contract rate on each loan will yield a minimum of 9.30%, up from 8.90% for the inaugural deal.
