CPS reduces called collateral in next $233M subprime auto ABS
Consumer Portfolio Services has boosted credit enhancement, slightly, on its next subprime auto-loan securitization, to offset a reduction in credit quality.
The $233.73 million CPS Auto Receivables Trust 2018-D is, the deep subprime lender’s fourth deal of the year. The $112.3 million tranche of Class A notes due January 2022 benefits from 55.15% credit enhancement, up from 53.7% for its prior transaction, completed in April.
One of the factors contributing to the decline in credit quality is the decreased seasoning of loans in the latest deal. This reflects the fact that a lower portion of loans, just 3.97% are recycled collateral from older deals that CPS called, according to Kroll Bond Rating Agency. By comparison, called collateral represented 11.4% share of pool of loans backing 2018-C transaction in July.
The first two deals of 2018 did not include formerly securitized loans, and also had senior-note CE around the 55% area.
The Class A notes have a preliminary AAA rating from Kroll and S&P Global Ratings; CPS is also issuing four subordinate classes of term notes with a ratings range of AA to BB.
The notes are secured by a pool of $161.4 million in loans originated by CPS for primarily independent used-car dealer lots. The contracts have an average balance of $16,320, a weighted average FICO of 564 and four months of seasoning. The transaction features a large portion of used vehicles financed by CPS accounting for 72.4% of the pool, with an average of 51,934 miles per care at a weighted average APR of 18.95%.
The loans’ original terms averaged 69.1 months.
CPS caters to borrowers with troubled credit history or who lack credit files, with credit bureau scores ranging from 475 to 650. It has eight internal scoring tiers, and excludes borrowers from its lowest-end tier in the securitization. The top three tiers (which the company labels as Preferred, Super Alpha and Alpha Plus) made up 77.17% of the collateral pool balance – which is in line with recent CPS transactions.
Kroll expects losses to be in the range of 14.5%-16.5%, down from 6.8%-18.8% for the previous deal that it rated. (Kroll did not rate the 2018-B deal with called collateral.)
The securitization is the 31st since 2010 for Consumer Portfolio Services, which has issued 79 deals in total since 1994 totaling $12.9 billion. The company has a managed portfolio of $2.33 billion in assets and $189.6 million in equity, as of June 30 of this year.