MotoNovo Finance, a division of FirstRand Bank, plans to issue £101.3 million ($163 million) of securities backed by U.K. auto leases, according to a Moody’s Investors Service presale. Mercedes Benz and Santander Consumer also respectively priced German and Norwegian auto loan paper.
FirstRand Bank will buy £80 million of the £88.5 million; AAA’ rated senior tranche issued under Turbo Finance 5. The capital structure will also offer £9 million of Aa3’ rated class B notes and $2.5 million of Ba1’ rated class C notes. The unrated class D notes are sized at £1.3 million. The notes are due August 2021.
HSBC Bank and J.P. Morgan Securities are the lead managers on the deal. This is the issuer’s fifth public securitization transaction in the U.K.
The portfolio of underlying assets consists of hire purchase agreements granted to individuals and companies resident in the U.K. collateralized by new and used vehicles. The portfolio balance is approximately £391.7 million (at June 2014), for a total number of 61,548 hire purchase contracts. Roughly 94.64% have been granted to private individuals, while 5.36% to SMEs.
The portfolio is collateralized by 93.81% used cars and 6.19% new cars, relating to a variety of vehicle brands, with the largest concentrations in Vauxhall (15.41%), Ford (13.55%) and BMW (9.81%).
Mercedes Benz upsized and priced its German auto loan ABS this week. The deal dubbed Silver Arrow 5 was upsized to 1 billion ($1.3 billion) from its original size of 800 million.
The 1.3-year senior tranche priced at 27 basis points over one month Euribor, in line with guidance, according to Informa Global Markets. Standard & Poor's has assigned preliminary 'AAA ' ratings to the class A notes.
Silver Arrow Compartment 5 is Mercedes-Benz Bank's fourth German publicly-rated asset-backed securities (ABS) transaction. The issuer was last in the market in October 2013 with Silver Arrow S.A., Compartment 4. Commerzbank is the lead arranger.
At closing, the trust will also issue 8 million of unrated class B notes to fund the non-amortizing liquidity reserve. This liquidity reserve is available to pay interest shortfalls and ultimately credit losses.
S&P stated in the presale report that the pool is exposed to higher borrower default risk because more than half of the collateral (63%) is comprised of loan contracts with balloon payments. These loans have a large installment at maturity and do not feature a dealer buyback obligation. So, if an obligor defaults on the balloon payment, Silver Arrow, Compartment 5 incurs an additional loss equal to the difference between the balloon installment and the vehicle's sale proceeds.
Investors also had access to a share of Norwegian auto ABS assets via Santander Consumer Bank’s Bilkreditt 6. The 1.7-year, 700 million senior tranche, priced at 37 basis points over one-month Euribor. Moody's Investors Service and Standard & Poor’s have assigned provisional ratings of Aaa’/ AAA’ to the notes.
Santander, BNP Paribas, J.P. Morgan and Deutsche Bank AG are joint lead managers on the deal.
This is the sixth Norwegian public securitization transaction sponsored by Santander Consumer Bank.
The majority of the pool (71%) is comprised of loans that finance used cars. As of July 2014 the provisional portfolio consists of 37,756 loans with a weighted average seasoning of five months and an aggregate outstanding amount of approximately NOK7.5 billion ($1.2 billion).