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DriveTime makes $480M splash in deep subprime auto pool

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DriveTime Car Sales Co. is returning to the deep-subprime auto asset-backed market with a slightly improved credit mix behind its new $480 million bond offering.

DT Auto Owner Trust 2018-1 includes a mix of higher FICO borrowers with more available cash to make payments than the pool from DriveTime’s November 2017 transaction. That allowed for slightly lower credit-enhancement on four of the five classes of notes being issued through trust.

The lower CE levels also reflect lower servicing fee assumptions for the pool, according to S&P Global Ratings.

S&P and DBRS on Thursday issued preliminary ratings, including triple-As for the $210 million senior Class A tranche of three-year notes for DT 2018-1, the 23rd securitization for Drive Time Car Sales Co. since 2010. Credit enhancement for the Class A notes is 66.5%, down from 67.5% last November.

The deal will also include a $57 million Class B in notes due 2022 (rated AA); $87 million in Class C (rated A) and $69 million in Class D (BBB) notes that all have five-year maturities; and a Class E $57 million note with BB ratings and a 2025 maturity.

The credit improvements in the pool include a higher percentage (77.21%) of originations from the lender’s top three internal grade tiers, and a decrease in lending to no-FICO borrowers (17.2%, down from 20.02% in DT Auto Owner Trust 2017-4).

S&P has lowered the expected loss range on the 2018-1 deal to 29%-30%, from 29.5%-30.5% from 2017-4, a reflection of the improved underwriting standards that resulted in improved delinquency performance in the four securitizations DriveTime issued last year.

DBRS expects losses of 30.75%.

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Auto ABS Subprime lending DriveTime Car Sales S&P DBRS Morningstar