GM Financial and Ford Motor Credit added $2.3 billion to the vehicle-lease ABS pipeline this week, providing fresh momentum to an asset class that had slow issuance levels over the summer.
The $1.2 billion GM Financial Automobile Leasing Trust (GMALT) 2018-3 is the third securitization leases this year for captive finance arm of General Motors and the 14th overall for the trust. The deal has slightly improved credit metrics over its prior deal in June, including lengthier contract seasoning of 13 months and a highest-ever average borrower FICO of 772.
Ford Motor Credit’s second lease securitization of the year, a $1.1 billion transaction, will be secured by closed-end leases originated through Ford-franchised dealers, with $1.25 billion in outstanding balances.
The two transactions are the first U.S. auto-lease securitizations of the third quarter, bringing year-to-date auto-lease ABS volume to $11.3 billion, according to data from Finsight. Issuance trailed the 2017 pace by approximately $1 billion through June of this year.
At the close of the latest transactions, GM Financial and Ford Motor Credit will be the leading issuers of vehicle lease-backed U.S. ABS this year, at approximately $3.7 billion and $3.1 billion, respectively.
GM Financial Automobile Leasing Trust 2018-3
The longer seasoning has strengthened GMF's the deal by front-loading more maturities of the leases into the first four quarters of the transaction, representing 15% of the securitization value. (It tends to be more difficult to project resale values at the end of longer leases.)
The improved metrics prompted S&P Global Ratings to trim loss expectations to 0.8% of the 56,655 contracts with an original outstanding balance of $1.3 billion; that compares with 0.9% for GMF’s $1.24 billion 2018-2 transaction that priced in June.
The lower loss forecast comes despite an uptick in 30-plus-day delinquencies in GMF’s $45.3 billion managed portfolio of leases, which were 1.31% in the first six months of 2018, versus 0.97% in the comparable 2017 period.
Moody’s Investors Service expects losses to be lower, at 0.5%, a level that remains unchanged from the previous GMALT transaction (2018-1) that Moody’s rated in February.
GMF is marketing three classes of senior term notes including a split Class A-2 offering of $410 million in fixed- and floating-rate two-year notes; a similarly sized Class A-3 tranche due June 2021; and an $86.14 million A-4 class of four-year bonds. The capital stack also features a $192 million money-market tranche with a preliminary S&P rating of A-1+ and a short-term P-1 from Moody’s.
The inclusion of three subordinate tranches are similar to GMALT 2018-2, although the $34.06 million Class D tranche in the next transaction is again carrying a BBB+ rating from S&P, down from the prior deal’s single-A S&P rating.
GMF is slightly lowering credit enhancement to 19.9% on the senior notes, down from 20.45% from the GMALT 2018-2 transaction, and returning the trust to its enhancement level from its first deal this year.
The notes are secured by $1.36 billion in initial combined lease values.
The leases are predominantly SUVs, trucks and crossovers, making up nearly 85% of the model types included in the pool. The top models, as a share of pool balances, are the Chevrolet Equinox (13%), Chevrolet Silverado (13%) and the Chevrolet Traverse CUV (8%).
RBC is the lead underwriter.
Ford Credit Auto Least Trust 2018-B
Fitch Ratings has assigned expected triple-A ratings to three classes of senior notes in Ford’s second lease trust securitization this year. The $1.1 billion Ford Credit Auto Lease Trust (FCALT) 2018-B includes a $375 million Class A-2 tranche split between fixed- and floating-rate notes that mature in April 2021.
The Class A-3 tranche totaling $348 million is due December 2021, and the $100 million A-4 tranche features notes with a February 2022 final maturity. All three classes are supported by 20.15% credit enhancement.
The transaction also includes a double-A rated Class B notes tranche totaling $100 million due March 2022, and an unrated Class C tranche sized at $52.43 million, due April 2023.
A double-A rated Class B tranche is sized at $56.19 million, with a March 2022 maturity.
Fitch reports the deal has consistent credit-quality features of recent FCALT lease-backed transactions, including a weighted average pool FICO of 751 and the combined projected future resale values of the vehicles reaching 74.6% of the pool’s original balance – in line with prior pools, including the $1.06 billion FCALT 2018-A deal priced in April.
The weighted average original terms for the leases is 35.9 months, with more than 81% of the leases at or above 36 months duration.
Like GMF’s transaction, the pool is well-seasoned at 11.1 months.
The most popular models are all light-duty trucks: the F-150 pickup truck (21.74% of the outstanding balances), the Explorer SUV (19.26%) and the smaller Escape SUV (17.43%). Contracts on passenger-vehicle leases account for 17.8% of the pool balance.
Fitch projected net credit losses at 1.2% of the book value of the pool.
JPMorgan, Citigroup, RBC and Credit Agricole shared lead underwriter roles.
