GM Financial, the captive auto financing arm of General Motors, plans to securitize $1 billion of auto lease receivables, the issuer’s third such deal, according to Fitch Ratings.
Issued under the GM Financial Automobile Leasing Trust, the series 2015-1 transaction is backed by a pool of retail closed-end vehicle leases made to prime and non-prime borrowers, all of which finance new GM affiliated brand vehicles.
Deutsche Bank Securities, J.P. Morgan and Goldman Sachs are the lead underwriters.
Fitch has assigned preliminary ratings to seven classes of notes to be issued from the trust. The money market tranche will be rated F-1’ and three classes of class A notes will be rated AAA.' The class A2 notes are due December 2017, the class A3 notes are due September 2018 and the class A4 notes are due June 2019. All four classes of notes benefit from 18.4% credit enhancement.
Also on offer are AA’ rated class B notes due June 2019, A’ rated class C notes due June 2019 and BBB’ rated class D notes due March 2020.
GM only began originating auto leases in December 2010 but has experienced significant growth in the last two years. At year end 2014, the issuer's U.S. managed total lease portfolio stood at $5.96 billion, compared to $2.6 billion at year-end 2013. The increase is due to more lease originations offered through GMF following GM's acquisition of Ally Financial’s international auto finance and financial services business in 2010. “Therefore, GMF’s U.S. lease penetration has increased considerably since the company first began its leasing activity,” stated Fitch analysts in a presale report.
Because GM’s auto leases are a relatively new product, there is less historical information to forecast how the pool might perform over time. Fitch noted in the presale report however, “conditions of the wholesale market over the life of the transaction will impact performance, irrespective of manufacturer."
Fitch bases its evaluation of the wholesale market on expectation for future macroeconomic conditions, technological risk and fuel price outlook. The rating agency is concerned that used car prices could level off or even weaken this year after rising for several years. This could reduce the value of vehicles coming off lease. The rating agency said this would likely lead to “moderately higher” loss rates.
Most of the GMALT 2015-1 pool is concentrated in three- to four-year leases with original terms greater than 36 months. Fitch believes that high concentration in longer-term leases can lead to increased residual losses, as wholesale market conditions are less predictable multiple years in advance.