Liquidity to subprime auto borrowers continues, as the Exeter Automobile Receivables Trust, 2021-3, or EART 2021-3, prepares to sell at least $1 billion in auto asset-backed securities (ABS), in a collateral pool that will include a couple of firsts for the program.
EART 2021-3 is the first in Exeter’s securitization program to include loans originated through a third-party direct lender. Also, the collateral pool includes loans with 72-to 75-month original terms, according to Moody’s Investors Service.
In terms of the how the program will include loans originated on the longer original terms, EART 2021-3 has two potential initial securitized pools, a smaller one amounting to $1 billion in issuance, and a large pool amounting to $1.3 billion. The small pool could contain around 2.1% of loans with original terms of 72 months or longer, while the large pool could contain around 1.9% of such loans, Moody’s said.
Exeter Finance LLC, an Irvine, Texas-based lender is the deal’s sponsor and servicer. Barclays and Wells Fargo Securities are lead underwriters on the transaction, Exeter’s third for 2021, according to Moody’s Investors Service. EART 2021-3 will be secured by non-prime, retail installment loan contracts on automobiles.
The company announced in June that Warburg Pincus is leading an investment group to acquire it, in a deal that the parties expect to finalize by yearend 2021. According to a June statement announcing the transaction, Exeter has a managed portfolio valued at around $7 billion.
Moody’s expects a cumulative net loss (CNL) expectation of 22.5% on the pool, plus a 54% loss at an ‘Aaa’ stress.
Yet in a potential credit strength, Moody’s identified a weighted average (WA) FICO score of 574, the highest of all the EART deals for 2021. The WA FICO scores for the EART 2021-2 and EART 2021-3 were 568 and 572, respectively. Aside from better credit scores, 1.45% of the smaller pool and 1.48% of the larger pool had loans that were extended as a result of the economic stress from COVID-19.
Moody’s expect to assign the most senior classes, A-1, a rating of ‘P-1,’ and ‘Aaa’ to the A-2 through B classes, on the small and larger pools. The c classes are expected to earn a rating of ‘Aa3’ and a ‘Baa3’ rating to class D.
