A pool of retail auto loan contracts, mostly on used vehicles, will secure $288.7 million in asset-backed securities, in a deal that sponsored by FFG Fundin, a subsidiary of Flagship Financial Group.
The deal will sell the notes through five tranches of class A, B, C, D and E notes. Classes A and B have legal final maturity dates of Nov. 15, 2030 and July 15, 2032, respectively, according to Kroll Bond Rating Agency.
The less senior tranches C and D have a Jan. 17, 2023 legal final maturity date, while the class E nots mature on Dec. 15, 2033, KBRA said.
Flagship Auto Securitization Trust, series 2026-1, will repay investors sequentially, with the class A notes receiving principal payments before all subordinate notes, and being paid in full before the next junior class of notes, KBRA explained.
The class A, B, C, D and E notes benefit from initial credit enhancement levels of 49.2%, 38.80%, 27.00%, 17.95% and 7.25%, respectively, KBRA said.
As for what contributes to the credit enhancement, KBRA finds that the notes benefit from initial overcollateralization that represents 6.25% of the pool balance as of Sept. 20, 2026, the rating agency said.
A cash reserve account equaling 1.00% of the pool's balance at its cutoff date is also part of the deal structure, KBRA said.
Flagship Financial Group plays several roles in the deal. The company is listed as the servicer, can waive or defer its servicing fee and certain other amounts that would otherwise be paid to the notes, the rating agency said.
Also, Flagship Financial Group originates its car loans through its Indirect channel, in which it purchases automobile loan contracts mainly from franchised dealerships that arrange financing for buying used vehicles; and Direct channels, which offers loans to customers who are refinancing existing auto loans. KBRA analysts say they represent 84.05% and 15.95%, respectively.
As for the underlying pool of assets, KBRA notes that they have an average loan balance of $29,451. On a weighted average (WA) basis, the loas have an annual percentage rate of 17.69%, and an original term of 72 months. Used vehicles account for 70.71% of the loans in the pool, the rating agency said.
Also on a WA basis, borrowers have a FICO score of 597, and the pool has elevated leverage of 122.6% loan-to-value ratio.
KBRA assigns ratings of AAA, AA and A to classes A, B and C; and BBB and BB- to classes D and E.
