Exeter Automobile Receivables Trust is preparing its first issuance of the year, selling $1.1 billion in auto asset-backed securities (ABS) secured by a pool of non-prime quality retail installment auto loan contracts.
The transaction will sell notes through seven tranches of classes A, B, C, D and E notes, according to a Securities and Exchange Commission (SEC) filing. Moody's Ratings says the senior notes, A1, A2 and A3, benefit from total initial hard credit enhancement of 60.9%. The B, C, D and E classes have credit enhancement levels of 45.2%, 32.5%, 18.8% and 7.4%, respectively.
Also, the notes have maturities ranging from Feb. 17, 2026 on the most senior A1 notes through Sept. 16, 2032 on the class E notes, according to the SEC filing. Moody's considers Exeter's experience as a sponsor and servicer, with a portfolio of about $11.6 billion non-prime auto loans, as of Dec. 31 2024, Moody's said.
Moody's says it expects a 21% cumulative net loss (CNL) from the EART 2025-1 asset pool, and a loss at a Aaa stress of 54%, both of which fall in line with what it expected from the EART 2024-5 pool, the rating agency said.
Deutsche Bank Securities, BNP Paribas Securities, J.P. Morgan Securities and Citigroup Global Markets are lead underwriters on the deal, Moody's said.
At closing all notes, except the class E, will benefit from credit enhancement including subordination. All the notes will benefit from a fully funded non-declining reserve account representing 1% of the pool balance.
Initially, the notes benefit from 6.4% in overcollateralization, expected to build to a targeted over-collateralization of 12.0% of the outstanding balance, according to Moody's.
Despite Exeter's experience, it has low durability as a servicer. This puts its default probability in the unknown, Moody's said. The pool also is heavily weighted toward longer-term loans, which represent 58.9% of the original balance of both the base and upsized pools.
Like other pools dominated by used cars, EART 2025-1 is potentially susceptible to declining used car prices, especially if demand subsides due to a slowdown in economic activity, Moody's said. Used cars compose 89% of the current pool, the rating agency said.
