Exeter Automobile Receivables Trust is preparing to issue at least $1 billion in asset-backed securities (ABS), backed by a pool of retail installment auto loan contracts that Exeter Finance extended to subprime borrowers.
EART 2025-5 can be expanded to $1.2 billion, with virtually the same capital structure characteristics, according to Moody's Ratings. The rating agency has a cumulative net loss expectation of 2.5% for the deal, with a loss at the Aaa stress level of 56%.
Moody's notes that the managed portfolio has steadily improved since the worst-performing 2022 vintages, one of the deal's credit strengths. Both 2024 and 2025 vintages are performing better than the 2022 and 2023 vintages.
Regardless of the issuance amount, EART 2025-5 benefits from total initial hard credit enhancement of 51.35% on the A1 notes to 5.50% on the class E notes.
Another positive credit characteristic is Exeter's experience, with more than 13-years of originating and servicing retail installment agreements and sponsoring and servicing 50 ABS deals. That resulted in a serviced portfolio of about $13.6 billion of non-prime auto loans by September 30.
As the pool amortizes, credit enhancement accumulates in the deal, Moodys said. Classes A, B, C, and D notes will benefit from subordination, and a fully funded non-declining reserve account of 1.00% of the initial pool balance, the rating agency said. Overcollateralization also confers credit protection to the notes and represents 4.50% of the initial pool balance.
The deal has a few credit vulnerabilities, however. Aside from the weaker credit quality of the underlying pool, Exeter Finance is of lower durability, with a long-term senior unsecured B3 rating, Moody's said. Exeter Finance might be less able to mitigate non-collateral related risks on behalf of ABS bondholders, Moody's said.
Also, the Trump administration's tariff policy, and the eventual higher sticker price for goods to consumer—might pose economic headwinds for consumers.
Moody's assigns P1 to the A1 notes; Aaa to A2 through class B; Aa3 to the class C notes; and Baa3 to the class D notes.
