The CPS Auto Receivables Trust 2022-A is preparing to issue about $316.6 million in auto asset-backed securities (ABS), secured by a pool of receivables on subprime auto loans with key changes from previous deals.
Credit Suisse Securities is the underwriter on the transaction, known as the CPSART 2022-A, which is expected to close on February 2, according to a presale report from S&P Global Ratings. The transaction will use a senior-subordinate structure, which also serves as a form of credit enhancement. Throughout the deal, subordination levels were 48.2%, 34.0%, 19.1%, 8.0% and 0%, on classes A, B, C, D, and E, respectively.
Overcollateralization and a reserve account comprise the other forms of enhancement on the transaction, enhancing initial hard credit enhancement. Among key changes, total initial hard credit enhancement were 13.0% and 5.0% for classes D and E, respectively, up from 12.1% and 4.0%, respectively.
The collateral reflects key changes, also, including a decrease in called collateral to 6.46% of the pool, compared with 7.9% of the closing pool, without prefunding, in the series 2021-C transaction, S&P said. Seasoning is about four months on the underlying loans of the 2022-A, compared with five on the 2021-C series.
S&P expects to assign ratings ranging from ‘AAA’ on the senior class to ‘BB-’ on the class E notes.
The percentage of loans with original terms of 61-72 months is lower, at 70.2%, compared with 79.1% in the 2021-C transaction.
Inflation persists in terms of consumer goods, but the weighted average (WA) annual percentage rate (APR) has decreased to 16.6%, from 18.8%, according to S&P.
Overall, S&P noted that it found the collateral pool to be stronger than those of the 2021-C transaction, mostly because of the higher percentage of better-performing loan types and the lower percentage of worse-performing loan types.
That, plus several other factors noted in the report led the rating agency to lower its expected loss levels on the notes. It decreased its expected cumulative net losses on the CPSART 2022-A transaction to a range of 17.0%-18.0%, from 18.7%-19.7%.
Among those stronger collateral pool factors are origination tiers’ static pool performance, and extension data that indicated a decline in extensions from the elevated highs of April-May 2020 to below pre-COVID-19 pandemic levels.
Consumer Portfolio Servicer is the originator and servicer on the transaction, while Wilmington Trust will serve as owner trustee, according to S&P.
