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Credit metrics dip in GMF's first 2020 prime auto ABS issuance

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GM Financial has slightly deteriorating credit risk factors in its first 2020 securitization of prime loans financing General Motors cars, trucks and SUVs.

According to presale reports, GMF’s $1.269.9 billion asset-backed transaction will be secured by a pool of loans that has a slightly lower weighted average FICO, longer terms and reduced average APR compared to prior deals issued via GMF’s securitization platform.

Regardless of declines in collateral quality, ratings agencies expect the same diminutive loss levels for GM Financial Consumer Automobile Receivables Trust 2020-1 (GMCAR 2020-1) that the shelf has experienced in its thee-year span.

The GMCAR 2020-1 deal – also the first publicly rated prime auto ABS of the year – has preliminary triple-A senior-note ratings from Moody’s Investors Service and S&P Global Ratings.

The senior-most term tranche is a Class A-2 split fixed/floating-rate notes offering due January 2023 totaling $426 million, the same size as the Class A-3 tranche due September 2024. The deal also includes a Class A-4 tranche maturing in March 2025 sized at $89.69 million. The captive-finance arm for General Motors (and subsidiary of General Motors Financial Co.) will also market three tranches of subordinate notes totaling $55.23 million, coming due between April 2025 and April 2026.

About 20% of the capital stack consists of a $254 million Class A-1 money-market tranche with preliminary ratings of P-1 (Moody’s) and A-1+ (S&P), both representing each agency’s highest short-term rating.

The deal is overcollateralized by 1.5%, or $19.04 million, with the senior notes benefiting from 6.1% credit enhancement.

In a presale report, Moody’s published expected cumulative net losses of 0.8%, unchanged from GMF’s previous deal and in line with the performance of 11 prior GMCAR securitizations issued since 2017. S&P’s range is 1%-1.2%.

The 48,929 loans in the collateral pool (with an average remaining balance of $26,656) have a weighted average FICO of 773 and an average APR of 5.11, each (slightly lower than recent GMCAR deals. An average LTV of 91.23% is elevated from prior issues.

The amount of extended-term loans in GMCAR pools also continues to expand, with 82% of the loan-pool balance in GMCAR 2020-1 represented by loans with terms of 61-75 months – the highest of any prior GMCAR transaction.

Longer loans have historically shown higher loss levels in asset-backed deals, although six- to eight-year loan terms are becoming more ubiquitous in prime and subprime auto ABS as dealers stretch out financing to accommodate higher-priced new vehicles (12% of the pool are used vehicles, a small increase from GMCAR 2019-4 that held only 9.5% used).

Average vehicle prices pooled in securitizations have risen in recent years as consumers flock to more expensive trucks and sport-utility vehicles. Trucks continue to make up the bulk of the collateral, accounting for 45% of the balances in the pool, followed by crossover vehicles (29%), passenger sedans (14%) and sport utility (12%).

But despite the lengthening loan terms, GM Financial had lower net losses and delinquencies in its $36.75 billion managed portfolio last year. The portfolio had total delinquencies of 4.1% and net credit losses of 1.3% as of September 2019; both figures are declines from full-year 2018 figures.

GMCAR 2020-1 was underwritten by Wells Fargo.

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