GM Financial is first auto lender out of the gate this year with $1.24 billion of bonds backed by prime auto loans.
GM Financial Consumer Automobile Receivables Trust (GMCAR) 2018-1 is the fourth prime auto loan securitization overall by the captive finance unit of General Motors, and the first to be rated by Fitch Ratings. The previous three deals were rated by Moody’s Investors Service and S&P Global Ratings.
The trust will issue a $261 million money market tranche and three term tranches with preliminary triple-A ratings from both Fitch and Moody’s; all four tranches benefit from 6.1% credit enhancement. There is also an AA/Aa3 rated tranche with 4.5% enhancement, an A/A1 rated tranche with 3% enhancement, and a BBB/Baa1 rated tranche with 1.75% enhancement.
The collateral for the bonds exceeds the value of the notes to be issued by 1.5%, and this overcollateralization is targeted to grow to 2%, consistent with prior GMCAR transactions.
Barclays Capital Markets, BofA Merrill Lynch, MUFG, and TD Securities are the deal’s joint bookrunners.
The bonds are backed by loans to predominately prime quality borrowers, with a weighted average FICO score of 772.3. Of the obligors in 2018-1, 82.6% have FICO scores greater than or equal to 700, the highest so far on the platform, according to Fitch. Further, only 0.2% of the pool has scores less than 600, and there are no borrowers without a FICO in the pool. “From a FICO perspective, this pool has the strongest credit profile of any of the four pools securitized by GMF to date,” says Fitch.
The majority of loans (84.7%) finance new vehicles, the weighted average seasoning is seven months, and has a diverse geographic, segment and vehicle model mix. Loans with terms of 61 months or more declined from the prior series and comprise 57.6% of the pool.
The vehicle segments are also consistent with recent GMCAR transactions, with 22% cars and 78% trucks and SUVs.
The weighted average loan-to-value ratio of 93% is in the mid-range of the prior transactions. 11.3% of the pool comprises contracts with LTVs greater than 120%, in line with prior transactions.
Both rating agencies cite as credit challenges the lack of performance data for prime auto loan transactions, since GM Financial only entered this market last year, and the recent trend of declining used vehicle prices, which could result in losses on cars that are repossessed.
Fitch expects net losses to reach 1.4% over the life of the deal; Moody’s expects them to be lower, at just 0.85%.
