First Help Financial is readying a $326.6 million deal backed by auto loan contracts originated through franchise dealers through the FHF Trust 2022-2, after a dramatic shift away from independent dealers.
In other changes from the FHF 2022-2 trust, the current collateral pool has a weighted average (WA) loan-to-value ratio of 108.2%, up from 104.9%, a higher FICO score of 673, up from 668 and a 67% higher concentration of 72-month loans, higher than the 66% on the previous deal, according to Kroll Bond Rating Agency's initial ratings assessment.
Deutsche Bank Securities and Goldman Sachs are lead underwriters on the deal, according to Moody's Investors Service, which also expects to assign ratings to the notes. While spreads are widening in many cases across asset classes and credit bands, Finsight sets spread guidance at around 235 basis points over the I-Curve on the short-term notes, rated 'AAA' by KBRA. Compare that with spreads of 250 bps over the benchmark on the FHF 2022-2 deal that priced last October, according to Asset Securitization Report's deal database.
On average, the collateral pool of loans has a $33,031 remaining loan size, with an annual percentage rate (APR) of 19%. Although the WA credit score appears to be moderate, a significant percentage of borrowers, 48%, have no credit score.
First Help Financial has been in the business for 15 years, extended to borrowers of moderate credit or no credit scores.
As of the transaction's statistical cutoff date, Feb. 28, 2023, the pool's securitized portfolio amount was $235.1 million, Moody's said, and the issuer is expected to purchase around $81.7 million additional receivables using the funds from a pre-funding account.
Financial Help Financial originated the loans, sells them the trust and will service the notes. Moody's considers FHF's servicer role to be a credit weakness, however, partly because of the small business size. Vervent is the backup servicer on this deal, as well as other auto transactions. Moody's considers a credit positive, given Vervent's 30 years of experience in the business.
As for credit enhancement, the notes benefit from a reserve fund, overcollateralization, subordination and excess spread. Also, credit enhancement builds up as the pool amortizes.
Moody's expects to assign ratings of 'A2' on classes A-2 and B notes, and assign 'Baa1' ratings to the class C notes. For its part, KBRA expects to assign 'K1+' ratings to the class A notes; 'AAA' to the $209.6 million, class A-2 notes, the bulk of the deal; and 'AA-' and 'A-', respectively, on classes B and C notes.
The notes have legal final maturities of April 15, 2024 through July 15, 2030.
