General Motors Financial Company, Inc. intends to sell approximately $866 million in auto loan asset-backed securities, with strong credit characteristics but a slightly longer time horizon for the loans in the pool.
Fitch Ratings intends to assign ratings to the notes, its first time rating the issuer, GM Financial Revolving Receivables Trust 2023-1 (GMREV 2023-1). The notes have a weighted average (WA) FICO score of 780.
When compared to similar transactions from competitors, GMREV 2023-1 has a stronger credit profile, Fitch said. Ford's FCAOT 2023-REV1 carries a weighted average FICO score of 747, while Toyota's TALNT 2022-1 is at 760.
General Motors Financial Company is sponsoring the deal, and Citigroup, Inc. is lead underwriter, according to Fitch. The collateral pool is made up of 43,775 loans with an average principal balance of $36,733. Some 82.8% of the collateral consists of new vehicles, and they have a seasoning of eight months on a weighted average basis, Fitch said, noting that "the geographic, segment and model mix is diverse." Also on a WA basis, those loans have a seasoning of 8.3 months. The deal's loan to value ratio is a WA 98.3%, a bit lower than 100.6% for the Ford portfolio mentioned above and 99.8% for Toyota's.
Fitch noted the higher concentration of longer-duration loans in the portfolio: 22.9% of the loans have an original term of 76 to 84 months. That's higher than the highest concentration found within General Motors' GMCAR platform, Fitch said. While GM data suggests these loans perform better than shorter ones, Fitch notes "an increased risk associated with longer-term loans as the loans amortize more slowly relative to vehicle depreciation."
That risk comes on top of concerns about the auto sector in 2023. Fitch has downgraded its outlook for prime auto loan ABS to deteriorating relative to 2022, as it expects industry-wide price moderation to continue. Supply constraints are expected to bolster values, however.
Meanwhile, Fitch expects a mild recession in the second half of the year, which could weigh on job growth and consumer demand, even as higher inflation continues to erode incomes.
Fitch says it expects to rate the most senior class of notes, class A, AAAsf; the B class AAsf, the C class Asf, and the D class BBBsf.
