Franchise and independent auto dealer loans will secure $289.6 million in asset-backed securities (ABS) that GLS Auto Select Receivables Trust, series 2024-2 is marketing tin investors.
Underlying borrowers in this deal are near prime, although according to ratings analysts at Kroll Bond Rating Agency. Sponsor Global Lending Services, which has a history of subprime financing, had originated $3.1 billion in loans year to date as of Dec. 31, 2023, representing a 15.3% increase from the $2.9 million in business that it did in 2022, KBRA said.
KBRA assigned ratings to the five tranches of class A, B, C and D notes. The notes have initial credit enhancement levels of 27.40% on the A notes, and 21.30%, 12.70% and 4.60% on the B, C and D notes, respectively.
Pricing expectations suggest the A1 notes could fall 21-24 basis points over the three-month interpolated yield curve, to 215-220 bps over the same benchmark on the BBB-rated D notes, according to the Asset Securitization Report deal database.
Deutsche Bank Securities, J.P.Morgan Securities and Wells Fargo Securities are on the deal as managers, according to the ASR database.
The capital structure will repay investors through a sequential pay structure, where the most senior notes receive principal payments in full before payments start on the subordinate notes, KBRA analysts said. The notes also benefit from overcollateralization, initially set at 3.60% of the pool balance as of the cutoff date and will increase to a target equal to the sum of 4.75% of the current pool balance and 1.50% of the pool balance as of the cutoff date.
GLS 2024-2 also has a cash reserve account representing about 1.00% of the pool balance as of the cut-off date, and excess spread of about 8.35%.
Global Lending Services sponsored the deal, and the fintech, founded in 2011, uses automated underwriting to extend financing. GLS started out originating subprime loans, and only began originating auto loans to near-prime borrowers in the fourth quarter of 2021. It was only able to provide 25 months of performance data in this credit group, however, which counts as a potential credit negative, KBRA said.
As for the underlying loans, they have an average balance of $27,318, a loan-to-value ratio of 119.2%, original term of 73 months and an average interest rate of 15.6%, KBRA said.
The notes have legal final maturity dates of April 15, 2025 on the A1 notes; June 17, 2030 on the A2 through C notes; and Aug. 15, 2031 on the class D notes. S&P Global Ratings intends to assign ratings of A1+ to the A1 notes; AAA to the A2 notes; AA to the class B notes; A to the class C notes and BBB to the class D notes, according to the ASR database. For its part, KBRA said it assigns ratings of K1+ to the A1 notes; AAA to the A2 notes; AA+ to the class B notes; A+ to the class C notes and BBB to the class D notes.
