Exeter Finance is returning to the securitization market to sell $976.3 million in bonds secured by revenue from a pool of non-prime auto loans, making it the trust's fifth transaction this year and its 47th overall.
This time Exeter Automobile Receivables Trust, 2024-5 has a loan-to-value ratio of 116%, after moving up slightly and consistently since the 2021-4 transaction, according to Moody's Ratings. Used vehicles account for 91% of the pool, according to the rating agency. The transaction, known as EART 2024-5, will sell notes to investors through seven tranches of class A, B, C, D and E notes.
All the three senior class A notes benefit from 60.95% in total initial hard credit enhancement, Moody's analysts said. Classes B, C, D and E are covered by 45.0%, 31.35%, 17.65% and 6.65% in total hard credit enhancement, respectively, the rating agency said. A reserve fund representing 1.00% of the total balance helps provide the credit enhancement to the notes.
EART has a half dozen institutions signed on as lead underwriter—Barclays Capital, J.P.Morgan Securities, Mizuho Securities, Citigroup Global Markets, Deutsche Bank Securities and Wells Fargo Securities.
Asset Securitization Report's deal database estimates that yields will range from 4.86% on the P1 notes to 7.33% on the class E notes, rated BB- from Fitch Ratings. All notes are pegged to the three-month interpolated yield curve, according to the deal database.
The most senior class of notes, rated P1 by Moody's, has a legal final maturity date of Oct. 15, 2025. The A2 through class E notes have maturity dates ranging from April 15, 2027 through May 17, 2032. Moody's sets its cumulative net loss expectation for the EART 2024-5 at 21%, with the loss rate at a Aaa stress at 54%, and these are the same as similar expectations on the EART 2024-4 transaction, its analysts said.
On a weighted average (WA) basis, the pool assets have a FICO score of 582, and a remaining term of 72 months.
Exeter's experience as a sponsor and servicer are a boon the credit of the notes, Moody's said. Another credit advantage is that credit enhancement will build in the notes during amortization, Moody's said. At closing the notes benefited from initial overcollateralization representing 5.65% of the initial pool balance. Over time this will build to represent 11.85% of the outstanding pool balance and will not fall below 1.50%, the rating agency said.
Yet the pool has several credit vulnerabilities, including a high concentration of loans with longer-terms. Most of the pool, 58.3%, is represented by loans with original terms of 73-78 months. Although that is lower than the 58.7% present in the EART 2024-4 pool, the concentration on the latter deal is at the higher end compared with prior transactions from the trust, Moody's analysts said.
