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GLS marketing $254M subprime auto ABS deal

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Global Lending Services, a subprime auto lender that has ramped down its expansion plans for 2020 amid the coronavirus outbreak, is proceeding with its second auto-loan securitization of the year.

GLS Auto Receivables Issuer Trust 2020-2 is a $254.13 million transaction of four classes of notes backed by a pool of 15,947 loan accounts to troubled-credit borrowers with average FICOs of 565.

Like other recent subprime auto loan ABS issuers, GLS is boosting credit support to buffer investor worries over loss risks associated with the economic fallout from the COVID-19 pandemic.

Credit enhancement for the senior Class A notes totals 44.9%, including a 31.8% in subordination support from junior notes backed by a pool of accounts with balances of $285.86 million. The Class A notes have preliminary AA ratings from S&P Global Ratings.

That CE level compared to 42.15% in it’s most recent securitization that priced in FEB/MAR.

The loans have average principle balances of $17,926, APRs of 18.71% and original terms of 68.83 months – the latter a slight decline from GLS’ prior ABS offering. The loans are seasoned an average of 2.16 months.

The percentage of extended term loans of between 67-72 months declined to 75.57% in comparison to prior deals, where the proportion of long-term loans was over 80% for three GLS transactions dating back to 2019.

Used vehicles make up 82.69% of the collateral, with average mileage of 43,103. The WA loan-to-value ratio is 121.29%.

The loans were culled from GLS’ $2.83 billion manage portfolio, which GLS had planned to expand to nearly $3.8 billion by year’s end with aggressive growth plans, according to S&P. The risks of a long-term economic slump and rising U.S. jobless claims has stalled those plans, although S&P expects the lender – majority owned by BlueMountain Capital Management – will resume expansion in 2021.

S&P has projected cumulative net losses of between 21.5%-22.5% for the portfolio.

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Subprime lending Auto ABS