Mercedes-Benz Auto Lease Trust 2021-B is preparing a $1.2 billion sale of notes backed by prime auto leases, and the general outlook on the notes is stable coming out of the pandemic.
While the deal has a strong collateral pool due to a large concentration of prime auto leases, other credit attributes demonstrate that the trust is moving slightly further down on the credit spectrum, according to research from FitchRatings.
Also, residual value composition in the pool is decreasing. Undiscounted base residuals of vehicles in the pool represent 62.4% of the trust’s securitization value, down from 67.4% in the 2021-A deal.
Suppressed residual value on the vehicles has lessened, due mostly to a brisker pace of economic recovery, government stimulus interventions to stem pandemic-related losses and vaccination rollouts, according to FitchRatings.
JPMorgan Securities is lead underwriter on the deal, in which the capital structure calls for four classes of notes with legal final maturities that range from July 2022 on the A-1 class to March 2027 on the A-4 notes.
Mercedes-Benz Financial Services USA LLC is the servicer and sponsor on the deal, which has a weighted average FICO score of 780, plus strong seasoning of 113 months.
Initially, hard credit enhancement is at a target of 12.5%, and is the lowest among all previous transactions, while initial excess spread is expected to be 4.8%. In a first for the platform, MBALT 2021-B will be the first transaction to include leases with a 621-649 FICO bucket, totaling about 2.4% of the aggregate securitization value.
From a credit quality perspective, the inclusion of the lower FICO bucket has weakened 2021-B compared with prior deals. Further, the WA FICO score of 780 is lower than the 788 FICO score in the 2021-A.
The top five vehicle models in the pool represent 67.7%, a slightly higher representation from 66.7% in the 2021-A deal and lower than the 72.2% in the 2020-B. In terms of geographic concentration, California represents 30.1% of the leases in the deal, Florida 13.7%, New York accounts for 12.4%, New Jersey accounts for 7.6%, and Texas 6.5%.
