M&T Bank Auto Receivables Trust, which makes rare appearances on the securitization market, is returning to raise $767.3 million in bonds, the platform's first deal of 2025.
MTBAT 2025-1 will sell notes to investors through five class A tranches, and the underlying pool is made up of prime-quality assets auto loans that Manufacturers and Traders Trust originated, according to Moody's Ratings. Aside from the assets' credit quality—borrowers have a weighted average FICO score of 761 and the WA term is 76 months—the bank's 60 years of experience originating and servicing auto loans is a boost the notes' credit.
Other elements that work in the deal's favor is a buildup of credit enhancement as the pool amortized. When the deal closes, which is expected this week, the notes will have initial overcollateralization of 2.75%, with a target of 4.25%, plus a non-declining reserve account representing 0.25% of the pool balance. The deal might also benefit from excess spread.
All told, the MTBAT 2025-1 notes have total initial hard credit enhancement equaling 3.0% of the pool balance, Moody's said. Notes have maturities ranging from Feb. 17, 2026 on the P-1-rated notes to July 15, 2032 on the Aaa-rated notes.
Moody's estimates that MTBAT 2025-1 expect a cumulative net loss of 1.0% on the notes, with a loss at the Aaa level of 6.50%.
Barclays Capital, Citigroup Global Markets, AmeriVet Securities and M&T Securities are the deal's lead underwriters
There are several credit challenges, according to Moody's, and that is M&T Bank's limited ABS experience, Moody's said. It completed a securitization in 2013, and another in 2024, but that is all. The pool also has a higher level of longer-term loans, as about 87% of the pool balance is made up of contracts with an original term longer than 60 months. Lastly, used vehicle prices started to decline from high levels in 2023, a potential pain point since used cars make up 60% of the pool. Prices could decline further if the current tight supply of new cars eases, and demand slackens.
Moody's assigns Aaa to the remaining class A notes. S&P Global Ratings assigns A1+ to the A1 notes and AAA to the remaining notes.
