GM, World Omni each offer up third prime auto ABS of 2020
General Motors Finance and U.S. regional Toyota Motor Corp. finance company World Omni have each launched a third securitization of prime auto loan originations for 2020.
GM Financial Consumer Automobile Receivables Trust 2020-3 is a $1.2 billion offering that could potentially be upsized to $1.6 billion, based on market conditions.
For the first time the General Motors captive-finance arm is including loans with terms up of to seven years (84 months) for vehicles, making up 4.8% of either proposed pool. Nearly 84% of the loans have terms in excess of 60 months, elevating the pool’s average original terms on loans to 70.4 months – among the highest ever for a GMF transaction.
The additional long-term collateral is a nod to the trend of more extended loans being issued to finance premium GM-branded trucks and sport utility models attracting a majority of new-vehicle buyers.
The smaller pool is proposed with 45,878 loans with an average current principal balance of $28,490 and a weighted average APR of 4.4% for borrowers with average FICO scores of 769. The loans are seasoned an average of 9.3 months. The larger pool would have the same characteristics – including an 81% share of new vehicles and an 89% concentration in trucks, SUVs and crossovers – involving 58,740 loans.
Fitch Ratings and Moody’s Investors Service have assigned preliminary triple-A ratings to three classes of senior notes, including a $460.71 million Class A-2 tranche ($589.89 million if upsized) maturing in July 2023 split between fixed- and floating-rate tranches (the latter tied to one-month Libor). Also getting top investment-grade ratings were the Class A-3 tranche due April 2025 to be sized at $447.53 million or $573 million, and the Class A-4 tranche due January 2026, totaling either $102.86 million or $131.7 million in notional value.
GMF’s trust will also market three tranches of subordinate notes, which help to support the 6.6% initial hard credit enhancement on the notes. GMF is providing a reserve account of 0.75% of the initial pool balance, a decline from 1% that many prime auto ABS issuers had adopted to quell concerns from investors worried about COVID-19 economic pressures on borrowers.
Fitch has established a cumulative net credit loss proxy of 1.65%, an increase from 1.55%, due mostly to ongoing recessionary trends related to the global pandemic. Moody’s cumulative net loss expectation is 1.5%.
Citigroup is the lead underwriter.
The $900.25 million World Omni Auto Receivables Trust 2020-C is the second ABS transaction sponsored by World Omni Financial Corp. since June, as its trust continues to pump out triple-A rated securities that – like those from GMF’s shelf – benefit from support from the Federal Reserve’s Term Asset-Backed Securities Lending Facility that aims to boost issuance and maintain liquidity in the securitizaiton market.
Last week, the Fed extended the TALF program until Dec. 31.
Fitch and S&P Global Ratings assigned early AAA ratings to the $335.62 million Class A-2 tranche maturing in December 2023 (which will also have a fixed/floating-rate split among the notes), a $299 million Class A-3 tranche due November 2025 and a $75 million Class A-4 tranche due October 2026.
The loans were underwritten for new- and used-car purchases of Toyota-branded vehicles sold through Toyota franchise dealers in a five-state region in the Southeastern U.S. (Florida, Georgia, North Carolina, South Carolina and Alabama). World Omni does not finance non-Toyota vehicles.
World Omni, a subsidiary of JM Family Enterprises, operates as Southeast Toyota Finance in providing retail installment and lease contracts. It also provides wholesale floorplan financing and capital and mortgage loans for certain dealers obtaining vehicles through a World Omni affiliate, Southeast Toyota Distributors.
The borrower pool remains strong with a WA FICO of 756. The percentage of extended-term loans remains elevated at 77.2% for the World Omni shelf. The loans are seasoned an average of 4.3 months, nearly half of the 9.5 months age of the loans in World Omni’s previous deal.
Fitch has a forward-looking credit less expectation of 1.8%, consistent with World Omni’s 2020-B deal. S&P’s expected net loss range of 1.8%-2% is also unchanged from the agency’s projections for 2020-B.