Exeter Finance is preparing to sell $702.3 million in asset-backed bonds to investors through the Exeter Automobile Receivables Trust 2024-1, secured by lease revenues on non-prime auto loans.
The transaction will issue seven tranches of A, B, C, D and E class notes, which have legal final maturity dates that range between Feb. 18, 2025 on the A-1 notes through Aug. 15, 2031 on the class E notes, according to Moody's Investors Service.
Exeter's experience as a securitization sponsor and servicer are a couple of the deal's most positive credit attributes, as well as its experienced management team, Moody's said. The notes' total initial hard credit enhancement ranges from 59.80% on classes A1, A2 and A3; 43.25% on the class B notes; 28.90% on the class C notes; 14.70% on the class D notes and 6.65% on the class E notes, the rating agency said.
BNP Paribas, JPMorgan Securities and Wells Fargo Securities are managers on the deal.
Although the pool is considered non-prime, the underlying loans are of high credit quality, according to Moody's. Only loans that have made at least one payment were included in the collateral pool, similar to EART 2023-5. At a weighted average (WA) 574, the pool's FICO score is slightly lower than that of recent pools, Moody's said. On a WA basis, the pool had a custom score of 249, also similar to the 2023-5 pool and higher than Exeter pools from 2022, as well as earlier years.
Credit enhancement on the notes increases as the pool amortizes, according to the rating agency. At closing, credit enhancement will include overcollateralization of 5.65%, increasing to a target of 12.65% of the outstanding pool balance, a non-declining reserve fund of 1.00% of the initial pool balance and 53.15% in subordinated notes.
Yet Exeter finance is considered a weak servicer, Moody's said. Among other credit challenges, some 47.7% of the original pool balance has terms of 73-78 months, compared with 41.7% in the EART 2023-5 pool, Moody's said.
All notes are benchmarked over the three-month interpolated yield curve, according to the Asset Securitization Report's deal database. Moody's expects to assign ratings of p1 to the A1 notes; Aaa to the A2 and A3 notes; Aa3 to the class C notes; and Baa3 to the class D notes. Fitch Ratings also intends to rate the notes, and assigns preliminary ratings of 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 class D notes and BB to the class E notes.
