Lendbuzz, a specialty auto lender, is preparing to sponsor a $198 million asset-backed securities (ABS) deal, called Lendbuzz Securitization Trust 2022-1, which will be secured by a pool of loans extended to consumers unable to get approval for financing from traditional sources.
Headquartered in Boston, Lendbuzz serves borrowers who are often shut out from traditional sources of funding because they have limited credit histories, despite the fact that they often have verifiable income to support auto loan payments, according to a pre-sale report from Kroll Bond Rating Agency.
Lendbuzz recently closed a new $100 million committed warehouse facility, which has a 12-month revolving period, and will bring the company’s total warehouse funding capacity to $400 million, KBRA said. Also, Lendbuzz began originating more loans in the 300-450 range of Artificial Intelligence Risk Analysis (AIRA) scores, the lowest at the company. The AIRA metric is Lendbuzz’s proprietary credit score that uses alternative data sources beyond the traditional FICO score, KBRA said.
Although the company itself began originating more of those types of loans, the current deal has a much lower concentration of loans with AIRA scores between 300 and 450, according to the rating agency. In the LBZZ 2021-1 transaction, for instance, scores in the 300 to 450 range represented 17.6% of the pool, while the current transaction has far less, with an 8.54% penetration.
LBZZ 2022-1 has other notable differences from LBZZ 2021-1, according to KBRA. The average loan balance, $24,617 is higher than the latter’s balance of $17,745, with a lower seasoning of three months, compared with 10 months, KBRA said.
The transaction will issue notes from two classes that will repay investors through a sequential pay structure. The class A notes will receive principal payments prior to the subordinate notes in class B, KBRA said.
Initially, the notes had an overcollateralization level of 4.4%, which will build to a target of 7.0% of the current pool balance, subject to a floor equal to 0.5% of the initial pool balance, KBRA said.
KBRA expects to assign ‘A’ to the $192.4 million, class A notes, which have an initial credit enhancement of 8.1%, and ‘BBB’ to the $5.5 million class B notes, which have an initial credit enhancement of 5.4%. The deal also has a reserve account of at least 1.0% of the initial pool balance, funded at closing.
The deal also benefits from excess spread of about 5.1%, based on a weighted average (WA) collateral interest rate of 11.6%, after 2.0% of servicing fees, and a WA life adjusted coupon of 4.4%, KBRA said.
