Yet another auto deal is coming down the pike. Consumer Portfolio Services is in the market with a split-rated subprime transaction for a total $185 million, according to pre-sales from both Moody’s Investors Service and Standard & Poor’s.
The deal consists of five, fixed-rate tranches. The most senior piece, for $142 million, is a few notches from triple-A, having earned a ‘AA- (sf)’ from S&P and ‘A1 (sf)’ from Moody’s.
The deal is slated to close March 20, and its arrangers are Citigroup Global Markets and CRT Capital Group.
The deal’s A class piece has an initial subordination of 23.25%. CPS issued its first post-crisis standalone ABS in September 2010, according to S&P. “The company’s liquidity has improved in recent years, as it has secured multi-year credit lines from multiple sources,” the agency said.
While the company — like so many others currently in the subprime space — is ramping up origination, it is doing so, S&P said, “in a controlled manner.”
But the company’s experience and improved underwriting in the post-crisis era are evidently not enough to take the senior piece to a top-notch rating. “The senior-most class in the pro rata structure could be more vulnerable to back-end risk if losses rise later in the transaction, when a majority of the credit support might have already amortized or paid down,” S&P said. The weighted average FICO score of the borrowers in the deal's underlying pool is 562.
The subprime auto sector is in boom mode and a number of observers have made sure to point out that sped-up credit growth can bring sharper risks.