J.D. Byrider is marketing its first 2014 subprime auto loan securitization, according to a presale report published by Kroll Bond Ratings.
The $154.8 million CarNow Auto receivables Trust 2014-1 is the issuer's third securitization overall and the first to be rated by Kroll. It is structured with $90.3 million of class A notes rated AA’; $24.8 million of B notes rated A’; $22.4 million of class C notes rated BBB’; $7.9 million of D notes rated BB’; and $9.3 million of class E notes rated B’.
The class A notes benefit from credit enhancement at 53.25%m the B notes have credit enhancement at 39.99%, the c note have credit enhancement at 27.99%, the D notes have credit enhancement at 23.74% and the class E notes 18.74%.
J.D. Byrider focuses on lower quality subprime obligors with FICO scores typically ranging between 525 and 550. CNART 2014-1 is comprised of loans with a weighted average FICO of 550, similar to the last two deals the issuer brought to market. Approximately 22.11% of the loans in CNART 2014-1 have no FICO score.
The pool has a weighted average loan-to-value (LTV) ratio of 181%, an increase from the last deal, CNART 2013-1, which had a weighted average LTV of 177%. The loans in the current transaction also have a slightly longer original term of 50 months compared with 46 months in the previous deal. However the loans on average have a remaining term of 39 months, similar to the 2013-2 pool.
The pool again includes loans that have had down payments financed via “DIPs” or deferred installment payments. Kroll explained in the presale report that this allows a portion of the down payment to be spread out over four payments after the sale, usually bi-weekly or semi-monthly. DIP payments are made prior to the first principal and interest payment date, over a period of no longer than 65 days. During the DIP period, accrued interest is capitalized. If the DIP payments are not satisfied, J.D. Byrider reverses the transaction and treats it as a return.
“This component of the deal stresses obligors’ financial commitments to the program, since DIP payments are higher than normal principal and interest payments", according to the presale report.
The issuer has encountered some regulatory scrutiny over its lending practices. In May 2012, J.D. Byrider received a Civil Investigative Demand from the Consumer Financial Protection Bureau that required the company to provide certain documents and information and answer questions related to certain components of the company’s business. J.D. Byrider fully complied with the CFPB’s data request by the end of October 2012. On August 8, 2013, J.D. Byrider received a letter from the CFPB indicating the investigation had been completed with no enforcement action recommended.
The Department of Justice recently subpoenaed the two largest subprime issuers, Santander Consumer USA and General Motors, regarding past originations and securitizations but J.D. Byrider has not been contacted by the DOJ.
J.D. Byrider has been in the subprime auto finance business for over 25 years. In 2011, private equity firm Altamont Capital Partners led a recapitalization of the cmpany. It is currently 88% owned by Altamont and its affiliates and 12% owned by management and acquired franchisee owners.