Ally Financial priced its latest subprime auto loan securitization, the $750 million Capital Auto Receivables Asset Trust 2014-3, at wider spreads than the previous print in this sector by Americredit on Aug. 22.
The $166 million, class A2 notes with a weighted average life (WAL) of 2.01 years priced at 47 basis points over the interpolated swaps curve; the $166 million of class A-3 notes with a WAL of 2.69 years priced at 47 basis points over interpolated swaps; and the $56.4 million of 3.27-year, class A4 notes priced at 58 basis points over interpolated swaps. All three tranches are rated 'Aaa' by Moody's Investors Service, 'AAA' by Standard & Poor's and 'AAA' by Fitch Ratings.
The deal was lead managed by Citigroup, Credit Agricole and JP Morgan.
By comparison, Amercredit priced the 2.3-year senior tranche of AMCAR 2014-3 at 32 basis points over swaps.
At the subordinate level, Ally retained $74.3 million of notes and placed $32.17 million of 4-year notes rated A3’ by Moody’s and BBB’ by Fitch at a spread of 160 basis points over interpolated swaps.
Both deals priced after the Department of Justice's probe of subprime auto lending and securitization practices came to light. GM Financial and Santander Consumer USA have disclosed, in separate filings this month, that they had received subpoenas from the DOJ requesting information on the underwriting criteria for these loans, as well as the representations and warranties relating to the securitization of the loans.
The probe has also taken a toll on priced in the secondary market. “Spreads on subprime auto ABS have widened over the past three weeks, based partly on a broader market reaction to rising risks. However, spread movements have been exacerbated, in our view, by headlines surrounding subprime auto lending,” stated John McElravey, senior analyst at Wells Fargo, in an Aug. 22 report.
McElravey said he believes that market participants will likely maintain a cautious stance on subprime auto ABS until more clarity is gained on the DOJ probe.
The pool of collateral backing Ally's latest deal is comprised of 45,194 auto loans that have a weighted average original term of 67.13 months and a remaining term of 54.11 months. Approximately 62% of the loans are for new vehicles. The weighted average FICO score of borrowers in the pool is 631.
Ally was last in the market in April, with CARAT 2014-2. The issuer paid a spread of 49 basis points over interpolated swaps for the class A3 notes, with a weighted average life 2.58-years.
