Lendbuzz Securitization Trust's second securitization of the year will raise $215.7 million in bonds secured by a stream of income from retail consumer auto loans. This is also the seventh deal overall for sponsor Lendbuzz Funding and offers noteholders several key credit enhancements compared with the previous bond sale.
The sponsor comes to market as it juggles mixed performance results from 2023. Originations had increased about 51.8% on a year-over-year basis and revenues jumped 73.2%, according to ratings analysts at Kroll Bond Rating Agency (KBRA). Yet operating expenses increased 82.1% in the same period, leaving Lendbuzz's net income down 31.0% from 2022, KBRA said.
The capital structure indicates that LBZZ 2024-2 will sell notes through four tranches of class A, B and C fixed-rate notes, said S&P Global Ratings. The two A1 and A2 tranches have legal final maturity dates of May 15, 2025 and May 15, 2029. As the B and C subordinate tranches repay notes, they have a legal final maturity date of July 16, 2029, S&P said.
Goldman Sachs, J.P.Morgan Securities and RBC Capital Markets are managers on the deal, according to Asset Securitization Report's deal database, which also notes a closing date of April 26. Further, LBZZ 2024-2's notes are expected to price over the three-month interpolated yield curve, at spreads of plus 43 to 35 basis points on the A1 notes to plus 300 to 310 bps on the class C notes.
Lendbuzz will repay investors following a senior-subordinate sequential pay structure and has several credit enhancements in place to ensure that those payments are timely, S&P said. Total initial hard credit enhancement amounts to 2.9% and 15.1% on the A2 and B tranches, respectively. Those levels stepped up from 22.4% and 14.5%, respectively, compared with the LBZZ 2024-1. Initial overcollateralization 5.3% of the pool balance, up from 3.4%, and S&P notes that it will grow to a target of 9.15% of the initial pool balance.
The notes also have a reserve fund representing 1.00% of the pool balance, S&P said.
Loans from four product segments compose Lendbuzz's collateral pool, S&P said—those lacking in a credit file or FICO score, those with thin files, near prime and prime loans and subprime loans.
KBRA's notes about the collateral pool found that the loan-to-value ratio on the underlying loans ticked up slightly to 100%, compared with 99.6%. The percentages of borrowers with no FICO scores is lower, at 48.9%, down from 49.6% on the previous deal.
S&P assigns initial ratings of AA- on the A2 notes and A- on the B notes, skipping ratings on the A1 and C notes. KBRA says it will assign ratings of K1+ to the A1 notes; AAA to the A2 notes; AA to the B notes and A- to the class C notes.
