Only slightly more than two years old, auto loan originator Continental Auto Receivables Inc. has recently stepped up its growth in originating and servicing prime-quality auto loans in order to lay the groundwork for a premier entry into the securitization term markets.
"We are considering either a private or 144A securitization transaction, depending on the timing, the utilization of our commercial paper warehouse facility and depending on how the market changes," said Bill Coombs, president and chief executive of Dublin, Ohio-based Continental Auto. "I'm sure it will occur and equally confident that we'll try to...time it as a function of what is the best time both for ourselves, the agencies and MBIA."
Just last week, MBIA Insurance Corp. announced that it had arranged an increase to a commercial paper warehouse facility for Continental from $125 million to $175 million. The facility was initially arranged in July.
The company will sell its auto loans to a special-purpose subsidiary, which will borrow from Triple-A One Funding Corp., a commercial paper conduit rated A-1/P-1 and administered by MBIA.
"We are going to couple the securitization with a continued balance of potential whole-loan sales," added Coombs. "As we continue to see opportunities for growth in an area where we want our expansion, then we'll consider what options are available from that perspective, even if it includes looking for more increased facilities at that point."
While Coombs said that it is difficult to predict the timing of the transaction, and "it is tough to do this time of the year," he also mentioned that Continental "will do it when it can be done most efficiently.
"We want to have the time to move between the options carefully and not be forced into poor transactions."
Continental Auto was founded in 1997 by five executives who had previously managed the prime-auto lending operations of a major Midwestern regional bank, including an indirect auto portfolio that grew to more than $4.5 billion. The company's current outstanding debt both securitized and under warehouse exceeds $300 million, Coombs noted.
"Our challenge is to convince the market that we are truly a prime originator," he said. "It is somewhat unique in today's world for someone who is not a bank to be a prime company as well."
"We are pleased to help expand the funding for the continuing growth of this relatively young company, which has extremely capable and experienced management," added Michael Antonicelli, a vice president in MBIA's Structured Finance Division.