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DriveTime planning second subprime auto ABS issuance for 2019

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DriveTime Automotive Group is sponsoring a second pool of subprime used-car loans for 2019, adding a $456.5 million transaction to the year-to-date issuance volume of $9.7 billion in subprime ABS.

DT Auto Owner Trust 2019-2 will issue five classes of notes, collateralized by $550 million in auto loans secured by used vehicles sold through the firm’s network of company-owned DriveTime Car Sales and Finance Co. dealerships.

The $221.4 million in Class A notes in the capital stack have preliminary AAA ratings from Kroll Bond Rating Agency and S&P Global Ratings. The senior notes are backed by credit enhancement of 61.25%.

Including a $374 million ABS transaction in February, DriveTime has issued 65 securitizations since 1996, when it was known as Ugly Duckling Corp. (The company rebranded as DriveTime in 2002.)

For the 2019-2 transaction, the average principal balance is $16,718 on 26,917 loans, with weighted-average interest rates of 20.95% and original terms of 65 months. The loans, all originated and serviced by the Tempe, Ariz.-based lender, are seasoned an average of two months. The loans are secured by vehicles that are typically six years old with 75,000-85,000 miles, according to S&P.

The weighted average borrower FICO is 541, a slight decline from DT’s 2019-1 deal. That was a result of DriveTime including a higher percentage of loans to borrowers with FICOs under 550 compared to DriveTime’s first transaction this year (50.3%). But the percentage of loans issued to car buyers with no FICO decreased to 11.5%, an all-time low for the platform.

S&P has an expected net loss range of 28.5%-29.5% for the 2019-2 pool, unchanged from DriveTime’s two prior transactions. Kroll’s net loss expectations range from 29.4%-31.4%, in line with the previous transaction (DT 2018-3) that the agency rated.

Deutsche Bank is the lead underwriter.

In December 2018, DriveTime’s managed servicing portfolio was $4.58 billion, a 3% year-over-year decline. While delinquencies (31 days-plus) increased to 18% from 16.88% in 2017, net charge-offs declined to 14.32% from 15.27% the year prior.

Despite declining levels of sales, DriveTime turned profitable last year (netting $215.77 million), primarily from a net gain of $183.7 million recognized last year in its equity investment in online used-car retailer Carvana.

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Subprime lending Auto ABS DriveTime Car Sales