Exeter Finance is offering the largest securitization of revenues from non-prime retail auto loans in almost two years, a $859.3 million deal that is expected to push past challenges like a greater proportion of longer-term loans and lower than expected recovery rates.
Exeter Automobile Receivables Trust (EART), 2024-2 is slated to close by month's end and offers classes A through E notes, through seven tranches, plus an overcollateralization piece, according to ratings analysts at Moody's Investors Service. Pricing expectations range between 20-25 basis points, over the three-month Interpolated yield curve, on the A1 notes to 400 bps over the same benchmark on the class E notes. That range brings the notes near par, or between 99.98% and 99.99%, according to the Deal Database by Asset Securitization Report.
Pricing does not stray too far from where the series 2024-1 notes eventually closed, and the structure is also quite similar, according to the database.
Moody's lists Barclays Capital, Citigroup Global Markets, Deutsche Bank Securities, BNP Paribas, Citizens JMP Securities and Wells Fargo Securities as lead underwriters, while ASR's deal database lists BNP Paribas, Morgan Securities and Wells Fargo Securities as managers.
Maturities range between April 15, 2025 on the A1 notes to Oct. 15, 2031 on the class Es, Moody's said.
The seven tranches are all covered by total hard credit enhancements; 66.65% on all three of the class A notes; and 50.85%, 33.20%, 18.75%, and 8.55% on the classes B, C, D and E notes. That enhancement is composed of subordination, a 1.00% reserve fund, overcollateralization representing 7.55% of the total pool, according to Moody's analysts.
They expect a cumulative net loss of 21% on EART 2024-2, with a 54% loss at the Aaa stress, for several reasons. For one, Exeter is an experienced sponsor and servicer with 40-plus deals under its belt and $10.1 billion of subprime auto loans as of the deal's cutoff date, Feb. 29, 2024, Moody's said.
The pool, made up of 44,469 contracts, has a weighted average (WA) FICO score of 572, which is slightly lower than recent pools—574 on the 2024-1 series, for instance. The largest FICO distribution, 28%, falls below 540, Moody's said. The contracts have a WA original term of 73 months, and 98% of them, finance used cars and they are distributed mostly among three states—Texas, California and Florida.
Moody's intends to assign P1 to the A1 notes; Aaa to the A2 through B notes; Aa1 to the class c notes and Baa2 to the class notes. Fitch, meanwhile, assigns F1+ to the A1 notes; AAA to the A2 and A3 notes; AA to the class B notes; A to the class C notes; BBB to the D notes and BB to the E notes.
