Driveway Finance is preparing a $476.9 million securitization of new and used automobile loans extended to near prime obligors, primarily.
All of the automobile loans securing the LAD Auto Receivables Trust 2023-2, known as LADAR 2023-2, are fixed-rate installment contracts with a weighted average (WA) non-zero credit score of 732, analysts for Kroll Bond Rating Agency noted in a pre-sale report about the deal.
As of the March 31, 2023 cutoff date, the 23,405 loans in the pool had an average current principal balance of $29,582 and a weighted average (WA) coupon of 7.8%. Further, the collateral also had WA original and remaining terms of 73 and 68 months, respectively. New vehicles accounted for just 29.8% of the vehicles, while 70.2% of the loans in the pool are new vehicles, KBRA said.
The current transaction will be the fourth securitization from Driveway Finance and KBRA has only 33 months of performance data, beginning in May 2020, and that represents a potential credit drawback. J.P. Morgan Securities was manager on all three of LADAR's previous deals, with Mizuho Securities acting as co-manager, according to the Asset Securitization Report's deal database.
Despite the lack of historical information on the deal, the transaction benefits from several forms of credit enhancement, including overcollateralization at a level of 12.40% of the initial adjusted pool balance, the rating agency said. That OC cushion will build to a target of 14.10% of the initial adjusted pool balance, KBRA said.
DFC is the deal's primary servicer for the deal, while Vervent on the deal as backup, KBRA said.
LADAR will issue notes from six classes of through a senior-subordinate structure, and repay investors through a sequential pay structure, according to KBRA. An initial yield supplement overcollateralization amount (YSOC) of about $48.8 million, or 8.23% of the total unadjusted pool balance at the deal's closing, also bolster the credit on the notes, KBRA said.
LADAR also benefits from a cash reserve account funded at 1.00% of the initial adjusted pool balance, and excess spread of about 2.91%, KBRA said.
KBRA plans to assign 'K1+' to the class A-1 notes; 'AAA' to the bulk of the deal, the $246 million, class A-2 notes, as well as 'AAA' to the class A-3 notes. The classes B, C and D notes will be rated 'AA+', 'A+' and 'BBB+', respectively.
