CPS Auto Receivables Trust is preparing a $349 deal fortified with collateralization, subordination and reserve accounts throughout the capital structure to get most of the notes to top ratings, according to DBRS Morningstar.
Consumer Portfolio Services, a specialty auto finance provider, is the sponsor and servicer of the deal. CPS purchases the loan contracts indirectly from factory-franchised and independent car dealers. The collateral pool consists of subprime auto loan contracts on light-duty trucks, vans and minivans.
DBRS expects the deal to close on November 3, DBRS said.
Structured as a 144A transaction, the deal’s capital structure has five classes of notes. Initially, the class A notes received hard credit enhancements of 48.5%, and a 1% reserve account of the original pool balance. Further, CPS Auto Receivables has subordination of 44.5% of the original pool balance, and overcollateralization (OC) of 3% of the pool’s original balance, DBRS said.
On class B, the notes received an initial credit enhancement of 36.1%, including the 1% reserve account, OC of 3% and 32.1% of subordination. Class C notes had an initial enhancement of 25.6%, including the 1% reserve account, OC of 3% and subordination of 21.6%.
The subordinate classes D and E received similar credit enhancements, but to much lesser degrees.
DBRS noted that the cumulative net loss assumption on the deal is 14.8%, based on the expected pool composition.
DBRS noted that CPS Auto Receivables will also use a prefunding period, no later than December 11, 2021, that will amount to about 29% of the final pool balance.
The class A, class B and class C notes are expected to receive ratings of ‘AAA’, ‘AA’ and ‘A’, respectively, while the subordinate notes, classes D and E, will receive ratings of ‘BBB’ and ‘BB’.
