Lendbuzz Funding is preparing to sell $218.7 million in asset-backed bonds to investors that are secured by retail finance contracts on a range of models of new and used vehicles.
Lendbuzz Securitization Trust 2024-1 will issue the notes through four tranches of class A, B and C notes, according to ratings analysts from Kroll Bond Rating Agency. The Asset Securitization Report deal database indicates that the deal will close on January 31.
KBRA plans to assign a rating of K1+ to the A1 notes; AAA to the A2 notes; AA+ to the class B notes; and A- to the class C notes, according to the rating agency. Fitch Ratings is also slated to assess the notes, assigning AA- to the A2 notes and A- to the class B notes.
Familiar techniques bring credit enhancement to the notes, including overcollateralization, subordination, a reserve account equal to 1.00% of the pool balance, and funded at closing, and excess spread equaling about 4.71%. Also, the notes will repay investors sequentially, according to KBRA.
As of the pool's November 30, 2023 cutoff date, almost half of the loans, 49.6% did not have an associated FICO score, and the pool had a non-zero weighted average (WA) FICO score of 704, KBRA said. On average, the loans have a current balance of $26,823, a WA interest rate of 13.50%, and WA original and remaining terms of 64 and 62 months, respectively.
KBRA noted that Lendbuzz Funding will service the notes, and Vervent is serving as backup servicer on the transaction.
Another key potential credit boost is Lendbuzz's underwriting process, according to KBRA. No final credit approval happens without verifying potential borrowers' identities and their income, which includes practices like a text or email message. Using that linked bank account information, Lendbuzz's proprietary Artificial Intelligence Risk Analysis (AIRA) can also incorporate credit bureau, education, employment, and vehicle data to determine a potential borrower's credit risk.
While Lendbuzz's operations do lend some positive credit aspects to the deal, KBRA notes that some other deal characteristics impose a more mixed outlook. Take the collateral's loan balances and monthly payment trends. Elevated prices in the used car market, and higher interest rates had increased average loan balances and annual percentage rates since the issuance of the LBZZ 2022-1.
