GLS, ACA both preparing 2nd subprime auto bond offerings of 2018
Subprime lenders Global Lending Services and American Credit Acceptance Corp. are sponsoring their second securitization of subprime auto loans of the year, according to rating agency presale reports.
GLS has obtained its first AA senior-note rating by S&P Global Ratings for the $299.4 million GLS Auto Receivables Issuer Trust 2018-2, despite the fact that the credit quality of the collateral is slightly worse, by some metrics, than its previous deal.
American Credit Acceptance Receivables Trust 2018-2 will issue $248 million in six classes of notes, the most senior of which are rated AAA, similar to its recent securitizations dating to 2016.
Global Lending Services
GLS' deal is backed by a pool of $327.2 million new- and used-car loans. The offering consists of four classes of notes, including a $176.7 million, four-year Class A notes tranche that has preliminary AA ratings from both S&P and Kroll Bond Rating Agency. The notes are supported by 47% credit enhancement levels.
S&P rated the Class A notes from GLS’ previous transaction this year at single-A, but the new deal met the agency’s AA criteria.
S&P expects net losses of 19.5%-20.5%, compared to loss projections from the 21%-22% range on the February deal due to “improving  origination performance ... and the better-than-expected performance for the series 2017-1 transaction,” the presale report states.
Originations have grown on a quarterly basis for the last two years for GLS, reaching $178.1 million in the first quarter of 2018. Last year, the lender (backed by BlueMountain Capital Management) originated $557.5 million, and it has a managed portfolio of just over $1 billion in serviced loans.
Kroll Bond Rating Agency also issued an AA for the Class A notes, as it did for two of the three prior GLS transactions it has rated since 2016. The rating agency had issued only an A rating for GLS’ initial $266.5 million 2018 transaction when the lender delivered only 31.5% credit enhancement for investor protection.
The latest pool has a slight deterioration in weighted average FICO (561 from 564) and a lower percentage of new auto loans (24.6% from 27.2%).
Wells Fargo is the lead structuring agent on the transaction.
American Credit Acceptance
American Credit Acceptance Receivables Trust 2018-2 will issue six classes of notes, to be backed by up to $276.3 million in subprime auto and motorcycle retail contracts originated through independent dealer lots.
Kroll rated a $98.1 million Class A notes a triple-A rating based on 66% credit enhancement levels to the four-year senior tranche. (That is similar to four prior ACA securitizations.)
This was also the second 2018 issuance for ACA, and the latest among 21 issued since 2011 amounting to $4.53 billion. KBRA has rated 13 of the deals.
Kroll reports the latest deal is consistent with the makeup of recent ACAR deals, including a prefunding account that will be used to purchase additional retail contracts three months after closing for up to 22% of the original pool balance of $215.5 million.
ACA focuses on deep subprime consumers with FICO scores in the low-to-mid 500s. Approximately 10.2% of the accounts have no FICO score.
Kroll’s expected base-case losses are 27.15%-29.15%, lower than that of the previous ACA deal rated by the agency (27.9%-29.9% for ACAR 2017-4).