A top lender in UK used-car auto financing is piloting its latest revolving securitization secured by £405 million in consumer and commercial vehicle leases.
MotoNovo Finance is marketing its second deal of 2016 and 7th overall asset-backed with Turbo Finance 7 PLC, a multi-currency notes offering secured by a collateral pool of 62,629 vehicle loans with an aggregate receivables balance of £405 million (US$502.8 million). Over 94% of the vehicles securing the leases are used, with a weighted average remaining term of 3.4 months.
The tranche sizes of six note classes to be issued is to be determined; the senior notes that carry preliminary ‘AAA’ ratings from Standard & Poor’s and Moody’s Investors Service will be divided between British pound- and Euro-denominated notes, each with 14.2% available credit enhancement (based on subordination, reserves and an annualized excess spread that was 8.8% at closing. Both are floating rate, pegged to the one-month LIBOR and EURIBOR benchmark rates.
The remaining four notes will all be denominated in British pound sterlings.
The collateral in the high-interest loans (which have an average rate of 11.95%) include three types of UK vehicle loans: the “hire purchase” and “hire purchase plus” leases comprising over 86% of the collateral; and the remainder “purchase contract” loans that include an optional balloon payment at the end of a contract term.
Consumers who utilize purchase-plus loans can return the vehicle at the end of a lease, placing the residual value risk with the lender. Borrowers in both hire and purchase agreements have the right to voluntarily terminate the contract under UK’s consumer credit act after paying off at least half the vehicle’s original purchase price.
MotoNovo is the brand name for the London branch of FirstRand Bank (FRB London), the servicer
Turbo 7 includes a 5% share of motorcycle loans and 10% of hire purchase loans, which were not part of Turbo Finance 6 transaction earlier this year.
The pool included no delinquent loans at closing.
Bank of America Merrill Lynch, BNP Paribas, and Lloyds Bank are co-arrangers and lead managers on the transaction. Also participating are fellow lead managers Wells Fargo and FirstRand Bank.