The first-ever auto loan securitization from Regions Acceptance LLC brings more than just a new issuer to the ABS market, as Regions Financial Corp. also owns underwriter Morgan Keegan. As with any other captive issuer-underwriter relationship, Morgan Keegan will be leading future transactions for the Birmingham, Ala.-based regional bank, sources said.
Morgan Keegan, known more an as agency debt and mortgage securities underwriter, has never been lead manager on a consumer asset ABS. To date, Morgan has sold $3.2 billion of agency debt securities, according to Thomson Financial, ranking fifteenth in the league tables through last week.
Regions, rated Aa3/A/A+ by Moody's Investor Service, Standard & Poor's and Fitch Ratings, respectively, is a banking powerhouse in the South with roughly 700 branches in nine states. Going forward the company plans to use ABS "as a funding strategy," according to Ron Luth, senior vice president and supervisor of indirect lending for Regions. The company plans on bringing an auto ABS every six to eight months.
The collateral for 2002-1 comes via the Regions Dealer Credit Services platform, a service for Regions to make loans via franchise dealers. Regions Acceptance makes loans in 10 different states in the southeast U.S., primarily Alabama and Arkansas, which account for a combined 57% of the total pool.
Regions targets prime borrowers, with the pool averaging 733 Fico. Luth added that, while just over half of the loans (52%) are for used autos, they are late model vehicles, approximately one to three years old. Additionally, Regions contracts out the servicing rights for its auto ABS to World Omni Financial, although Regions remains as master servicer, meaning that while it is allowed to terminate World Omni as servicer, it must have a new servicer in place prior to doing so.