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CPS' next subprime auto ABS features more loans in upper credit tiers

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Consumer Portfolio Services is placing a greater emphasis on its higher-tier rated borrowers in its first subprime auto securitization of 2019.

The $254.4 million CPS Auto Receivables Trust (CPSART) 2019-A raises the percentage of borrowers from its “Preferred,” “Super Alpha” and “Alpha Plus” loan program to more than 45% of the total collateral pool of $166.1 million in loan balances included in the deal.

That compares to 42.4% in its previous asset-backed deal last October. The three categories of borrowers are owners who had higher average amounts financed and higher FICOs, and lower average APRs than that consumers on the low end of the credit-tier table. According to a 2018 Kroll Bond Rating Agency new-issue report, Preferred borrowers had an average APR of 12.3%, a FICO of 610 and loans with an average balance of $20,281.

On the lower end of the tier where credit losses are more likely to occur, the “First-Time Buyer” financing program has average APRs of 21.2%, with average 580 FICOs and an average financed total of $12,131.

For the 2019-A transaction, CPS will cap the share of first-time buyer buyers in the pool to 2.5% and those of its next-lowest tier program, “Delta,” to just 5%. The limits will help maintain current pool characteristics for additional loans expected to be added to the securitization as they accumulate in the $2.3 billion managed portfolio.

The transaction includes a prefunding account that will finance new loan acquisitions that could add up to 37% of the pool balance.

CPS, based in Las Vegas, purchases contracts originated from a network of more than 9,700 dealers, for whom it primarily markets its indirect loan support. The company’s loans target customers who have had “situational credit problems,” rather than “habitual” credit issues, and who display an ability to pay, adequate income and debt levels form stable employment.

The 2019-A transaction includes five classes of notes, featuring a $123.5 million Class A tranche due 2022 with provisional triple-A ratings from DBRS and S&P Global Ratings. (Kroll, which rated the previous CPS 2018-D deal, has not issued a presale on the first 2019 transaction.)

The double-A rated Class B notes maturing in 2024 total $40 million; the single-A rated Class C tranche due 2024 is $35.2 million; the Class D tranche sized at $29.94 million also maturing in 2024 is rated BBB by both agencies; and the $25.7 million Class E notes (due 2026) are rated BB- by S&P and BB by DBRS.

The deal excludes cleanup collateral from previously called securitizations, limiting the seasoning of the new transaction to 0.63 months. Called collateral made up 4% of the 2018-D transaction, which had 3.6 months seasoning.

Similar to Santander Consumer USA’s first subprime offering of the year this week, CPS has slightly reigned in the percentage of extended length loans. CPS has shaved the percentage of loans with terms over five years to 79.94%, compared to 81.55% for series 2018-D.

Also in the new deal, the weighted average loan-to-value ratio increased to 114.5% from 113.8% from CPS 2018-D, and the Class A credit enhancement was reduced by 75 basis points.

S&P has no changes in a projected net loss range of 17.75%-18.75%, similar to 2018-D. DBRS has applied a base-case cumulative net loss of 16.25% to the deal.

Credit enhancement for the Class A notes to 54.4% is in range of prior CPSART deals.

CPS, based in Las Vegas, has issued 34 previous securitizations.

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