Credit might be tightening across the lending spectrum, but Lobel Financial Corp., an auto finance company, is finding pleasant enough conditions to raise money on the asset-backed securities market for the first time.
Lobel Auto Receivables Trust, 2023-1, is slated to raise about $178.7 million in ABS, in a 144a deal backed by subprime auto loan contracts secured by used autos, light-duty trucks, minivans and sport utility vehicles. Its aggregated principal balance is significantly smaller than similar deals that DBRS Morningstar has rated, the company said.
Lobel Financial, based in Anaheim, Calif., originated the loans, will sell them into the trust, plus act as servicer and custodian in a deal that is expected to close by May 10, according to DBRS.
It is not clear who will manage the deal or act as lead underwriter on the deal, which offers four classes of notes senior and subordinate notes, according to the DBRS report. Initially, hard credit enhancement on the class A notes, which represents the bulk of the deal with $116.6 million in notes, amounts to 43.10%. The B, C and D classes of notes benefit from initial hard credit enhancement levels of 31.90% 24.45% and 12.05%, respectively, the rating agency said.
Other forms of credit enhancement include an initial overcollateralization rate of 10.55%, which will build to a target of 13.80%, plus a reserve account and excess spread, the rating agency said.
Family owned and managed, Lobel Financial was founded in December 1979 by writing loans in California. It has since expanded to 11 states, where 5,303 independent and franchised dealers originate loans through 12 regional offices around the country, while adhering to at least nine originations policy thresholds.
In Lobel Financial's managed portfolio none of its dealers—franchised or independent—accounted for more than 2.6% of contracts during 2022.
Lobel is coming to market for the first time, so DBRS compared its characteristics to other similar deals, including the Carvana 2023-N1 and the United Auto Credit Securitization Trust, 2023-1. Some 12,935 receivables secure the LOBEL 2023-1, with a principal balance of $15,446. On a weighted average (WA) basis LOBEL 2023-1 has an APR of 20.71%, loan-to-value ratio of 106.8%.
A vast majority of the loans in the pool, a combined 82.73%, have terms of between 49-60 months (58.46%) and 61-72 months (24.27%), DBRS said. In other characteristics, a slight majority of the pool (51.66%) have no credit scores. Among loans extended to borrowers with credit scores, however, those with 651 and greater account for the13.46% of the pool, the largest percentage.
DBRS expects to assign ratings of 'AA' to the $116.6 million, class A notes, the bulk of the deal. The class B notes should get a 'A' ratings; and classes C and D will come to market with ratings of 'BBB' and 'BB', according to the rating agency.
