First Investors and Santander Consumer USA are both marketing subprime auto loan securitizations.
First Investors plans to offer $223.6 million in its first deal of 2015.
The transaction called First Investors Auto Owner Trust 2015-1 will offer six tranches of notes. Kroll Bond Ratings Agency plans to rate the class A-1, money market notes, due April 2016, K1+’, the class A-2 notes, due April 2019, AAA’ and the class A-3 notes, due November 2020, AAA’. The notes benefit from credit enhancement at 22.5%
At the junior level, the class B and class C notes , both due June 2021, will be assigned preliminary AA’ and A’ ratings, respectively. The class B notes are structured with credit support at 17.5% and the class C notes benefit from credit support at 9.45%. Also offered is a class D tranche, due Jan 202, that will be rated BBB” and benefits from credit enhancement of 2.11%.
The issuer has improved its underwriting on its latest deal compared to its previous two transactions, FIAOT 2014-3 transaction, FIAOT 2015-1. For example the pool increased the number of loans financing new vehicle to 27.19% from 25% and the loans, on average, have a lower weighted average coupon of 13.5% compared to 13.7% and higher weighted average FICO score 585 compared to 584 .
First Investors is among the auto financing companies subpoenaed by the U.S. Department of Justice regarding their subprime lending and securitization practices. The issuer has also hired outside counsel to deal with this subpoena, according to the Kroll presale report.
First Investors fall under the umbrella of private equity owned auto loan financing companies. In October 2012, a company controlled by Aquiline Capital Partners, a private equity firm that invests in the financial services sector, acquired the issuer. However the issuer maintained its executive management team and has not changed its operating strategy as a result of the merger.
Also marketing is Santander Consumer USA's $1 billion of subprime auto loan deal to be issued under its Drive Auto receivables trust.
The transaction is the issuer’s second deal so far this year that pools borrowers with a weighted average FICO of 598. The loans have a weighted average coupon of 16.19% and 33.6% of the loans are used to finance new cars.
Standard & Poor’s has assigned AAA’ ratings to the class A-2-A notes and the class A-2-B notes, which are both due on September 2018. The class A-3 notes, due April 2019 will also be rated AAA’. The notes benefit from credit enhancement at 37.5%.
The issuer plans to offer four subordinate tranches rated from AA’ to BB+’. RBC Capital Markets is the lead manager on the deal.