Driveway Finance is sponsoring its first auto asset-backed securities (ABS) deal backed by prime collateral, raising $600 million through the LAD Auto Receivables Trust, 2025-3.
LADAR 2025-3 is the sponsor's twelfth 144A deal, and thanks to the prime collateral, the cumulative net loss expectation is 1.5%, according to Moody's Ratings. At a Aaa stress level, Moody's said, the loss is expected to be 8.5%.
The loss levels are notably lower than the rating agency's assumptions on the LADAR 2025-1 because the sponsor excluded borrowers with credit scores lower than 701 from the collateral pool. That resulted in the significant improvement of the collateral pool's credit quality.
LADAR 2025-3 will close on November 13, with J.P. Morgan Securities and Wells Fargo Securities as lead underwriter, according to Asset Securitization Report's deal database. The transaction will issue the notes through six tranches of class A, B and C notes, according to Moody's.
Classes A2 and A3 contain the bulk of the notes, $397.4 million, according to the capital structure.
The notes have legal final maturity dates range from Nov. 16, 2026 on the class A1 tranche to March 15, 2033 on the class C tranche. All the class A notes benefit from a total initial hard credit enhancement level of 8.05%, while classes B and C benefit from levels of 5.90% and 3.05%, respectively.
Overcollateralization, a non-declining reserve account and a reserve account also provide credit enhancement to the notes, Moody's said.
Despite the notable upward shift in the collateral quality, the deal's sponsor and originator both have limited histories, which does not give much insight into how the pool responds to stress, Moody's said. The LADAR shelf has a history of just twelve deals under its belt and data on portfolios managed by Driveway Finance goes back only to 2020.
The collateral pool contains 20,800 contracts and obligors on mostly used (67.09%) vehicles, Moody's said. The weighted average annual percentage rate was 7.63%, the rating agency said.
Moody's assigns P1 to the A1 notes; Aaa to the A2 through A4 notes; Aa2 to the class B notes and A3 to the class C notes.
