Fitch Ratings reported an initial assessment of the auto loan securitization issued by GM Financial Consumer Automobile Receivables Trust (GMCAR) 2022-3, including two potential securitizations with an expected stable outlook across all class notes.
These prime collateral pools are approximately $1.11 billion and $1.32 billion, with bonds totaling $1.01 billion and $1.20 billion. Since the pools are consistent, Fitch analysts Kshitij Rai and Nicholas Eklund wrote, the pre-sale report rated the $1.01 billion aggregate initial principal note balance, which among other factors considered market conditions at the time of pricing.
The capital structure consists of $194.15 million class A-1 notes with F1+sf expected rating, $214.99 million class A-2-A/AAAsf, $143.34 million class A-2-B/AAAsf, $298.33 million class A-3/AAAsf, $111.64 million class A-4/AAAsf. The remaining $44.47 million are class B/AA+sf, C/ A+sf and D/BBB+sf notes.
The principal balance allocated between A-2-A and A-2-B will be determined no later than the day of pricing, Fitch's analysts wrote, and Class A-2-B will not exceed 40% of the aggregate principal balance of class A-2 notes.
Fitch’s 2022 outlooks for prime auto loan ABS assets are neutral with positive ratings, as analysts expect the impact of the war in Ukraine on asset performance to remain modest, but find lower gross domestic product and higher inflation may take a toll on consumers increasing downside risks on weaker borrowers.
“Somewhat limited” data about the prime auto loans GM Financial started to originate in 2014 enticed analysts to use 2006-2011 “recessionary proxy data from comparable origination platforms,” GM Financial’s more recent 2016–2018 vintages and securitized performance to determine the initial base case, cumulative net loss (CNL) and derive a forward-looking credit loss expectation of 1.20%, according to the rating report.
The payment structure features sufficient hard credit enhancement (CE) totals of 6.10%, 4.50%, 3.00% and 1.75% respectively for class A, B, C and D notes, that are consistent with previous transactions, except 2020-4, 2020-3 and 2020-2, which had larger reserve accounts. Based on a 1.20% CNL proxy for each rating category, the transaction CE “is sufficient to support each expected rating” via excess spread, Fitch's analysts wrote.
The stable-rated GMCAR 2022-3 collateral pool of prime, new and used automobile, light-truck and utility-vehicle loans originated and serviced by General Motors Financial Company Inc. (GMF) have strong credit quality, which is expected to support the bonds’ performance. BofA Securities Inc., was the lead underwriter.
The securitization has a strong weighted average (WA) Fair Isaac Corp. (FICO) score of 779, 80% of the pool comprises new vehicles, and a diverse geographic, segment and model mix.
GM Financial’s auto loan portfolio was $55.3 billion as of March 31, 2022, up 13% from March 2021, predominantly driven by the expansion of its prime loan origination program, but includes subprime originations traditionally securitized through GMF’s AMCAR program.
Asset performance during this growth period remained strong and stable. Total delinquencies as a percentage of the portfolio were 2.1% as of March 31, 2022, up from 1.7% a year earlier. Repossessed assets remained low at 0.1%.
Loans with 76 months — 84 months have increased to 13.8% from 12.3% in 2022-2 and 2022-1. Fitch sees an increased risk associated with longer-term loans as they “amortize more slowly relative to vehicle depreciation,” Fitch's analysts note.
Fitch's long-term Issuer Default Rating (IDR) for GMF is ‘BBB–’/‘F3’ with a positive rating outlook, and finds it is a historically adequate originator, underwriter and servicer.
