GM Financial plans to issue its first auto lease-backed securitization from its GM Financial Automobile Leasing Trust.
The $705 million deal, GMALT 2014-1,is backed by a pool of retail closed-end vehicle leases on new General Motors (GM) affiliated brand vehicles originated and acquired by GM Financial (GMF) directly from GM dealers.
Deutsche Bank and JP Morgan are the lead underwriters on the deal. Fitch Ratings assigned preliminary ratings on the notes. The capital structure includes three AAA’-rated tranches of notes that benefit from 19.50% credit enhancement. GMALT 2014-1 will also offer a money market tranche.
Additionally, the structure offers $31 million in AA’ rated notes with 15.50% credit enhancement; $23.24 million of A’-rated notes with 12.50% credit enhancement; and $23.24 million of BBB’-rated notes with 9.50% credit enhancement.
The pool of collateral includes both prime and nonprime quality leases with a weighted average FICO score of 728, eight months of seasoning, a large concentration of cars and a diversified residual value (RV) maturity schedule.
GMF’s retail program originates primarily 36 to 39 month lease contracts. According to Fitch's presale report, the pool has a relatively high concentration of three-year and four-year leases, with original terms of 36 or more representing the vast majority of the pool. “The high concentration in longer term leases can lead to increased residual losses, as wholesale market conditions are less predictable multiple years in advance,” explained Fitch.
Fitch also noted that because of GMF’s relatively short operating history (the company began originating prime auto leases in October 2010) , it supplemented the GMF empirical data with proxy data from comparable origination platforms to derive a credit loss expectation.