The Mercedes-Benz Auto Receivables Trust is preparing to issue up to $1.3 billion in securitized notes backed by prime auto loans, making this the first auto loan ABS of 2024, according to observers.
It also helps establish the auto asset class as the standout performer to kick off the year. The supply of newly priced auto ABS was already about $2.3 billion in ABS by the second week of the year, without the MBART 2024-1 in the tally (or BLAST 2024-1), according to the Asset Securitization Report's deal database.
MBART 2024-1 has a base securitization amount of $1.1 billion, in a structure that would remain the same even if managers were to increase the size of the deal at some point.
The deal is slated to close at the end of the month, according to the ASR deal database, which also cited Citigroup Global Markets, Mitsubishi UFJ Securities and Societe General as managers on the deal.
The transaction will issue five tranches of class A notes, according to Moody's Investors Service. Ratings analysts did not assess the A1 notes; but the rest of the deal earned a rating of 'Aaa,' Moody's said. The same is true for S&P Global Markets, which only assigned the same AAA rating to the A2A through A4 notes. The notes appear to be benchmarked to the Secured Overnight Financing Rate (SOFR), according to Moody's and the ASR database. The notes have legal final maturity dates that range from Feb. 18, 2025 on the A1 notes through July 15, 2031 on the A4 notes.
The notes have total initial hard credit enhancement of 2.75%, including a non-declining reserve fund of 0.25% of the initial adjusted pool balance. The transaction also benefits from yield supplement over-collateralization (YSOC).
While the deal has a lot of positive characteristics, Moody's noted that the managed portfolio and 2022 and 2023 origination vintages are showing some deteriorating performance. About 86% of the 2024-1 pool was originated between Q4 2022 and Q3 2023. Further, Moody's increased its cumulative net loss (CNL) expectation for MBART 2024-1 to 1.05%, compared with the 2022-1 deal. Further, Moody's said, the deal's loss to liquidation for the 2022-1 and 2023-1 securitizations have been trending higher than previous transactions.
About 6% of loan receivables with original terms of greater than 72 months.
