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CPS adding to subprime auto-loan ABS pipeline in $274M deal

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Consumer Portfolio services is sponsoring its first subprime auto securitization since experiencing a rare downgrade to notes in one of its existing deals.

The $274.3 million CPS Auto Receivables Trust 2019-D is the lender’s fourth term securitization this year, and 35th since 2010, with an offering of six classes of notes. The $118.25 million Class A tranche has 58% credit enhancement, which is in line with recent CPS deals.

On Sept. 9, S&P issued one-notch downgrades to four Class E tranches of CPS deals issued between 2016 and 2017. The four tranches were placed under a negative credit watch in June by S&P due to higher-than-expected losses accumulating in the four deals (CPS Auto Receivables Trust 2016-B, 2016-C, 2016-D and 2017-A).

The move represented rare instance of a securitization tranche downgrade in the subprime auto ABS class, preceded by multiple downgrades of the subordinate notes for a 2016 securitization by defunct lender Honor Finance.

Despite the downgrade, the ratings on CPS’ new transaction stands alongside recent vintage deals: Both Kroll Bond Rating Agency and S&P Global Ratings have assigned preliminary AAA ratings to CPS 2019-D.

Borrowers in CPS pools typically have prior credit problems, with 44.94% of the latest pool having FICOs under 550. About 7% of the principal balance in 2019-D is for loans with no FICO score.

The transaction will pool $176.70 million of receivables, with another 35.75% of the receivables to be added after closing during a 45-day prefunding period on the transaction.

The WA loan balance per account is $18,319, with an average coupon of 19.32%. The average original terms are 68 months.

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Subprime lending Auto ABS