Foursight Capital Automobile Receivables Trust (FCRT) 2023-2 is preparing to raise $200.10 million, its second deal of the year—and its fourteenth rated overall. Non-prime and sub-prime auto loan receivables will secure the notes sold to investors.
The notes will be issued from a trust with a senior-subordinate, sequential-pay structure, so that interest and principal will be paid to the most senior notes in the trust, before payments are made to more subordinate classes, according to a pre-sale report from S&P Global Markets. In this case, the trust has two senior notes and four junior notes.
Foursight Capital, a subsidiary of Jeffries Financial Group, is the deal's sponsor, and also originated the loans, plus will act as custodian and servicer, according to S&P. Vervent is backup servicer on the deal, the rating agency said.
The A, B, C and D notes benefit from credit support at levels of 34.7%, 28.2%, 21.6% and 16.8%, respectively, according to S&P.
Analysts at Kroll Bond Rating Agency describe the receivables, which will finance new and used vehicles, as near prime. As of June 30, the cutoff date for assembling this collateral pool, the underlying borrowers had a weighted average (WA) credit score of 645, a remaining term of 65 months, and interest rate of 15.93%, KBRA said.
Scores between 601-650 account for 72.02% of the FICO distribution on FCRT 2023-1, compared with 46.65% on the FCRT 2023-1, according to KBRA. That band accounted for the largest part of the FICO distribution on both deals, but the concentration was just more pronounced on the current deal.
Also, Foursight Capital updated its underwriting guidelines in the months since the FCRT 2023-1 came to market. Those changes included eliminating the application flow to Open Lending Insured Loans, increasing the minimum credit depth to two years, from one year, on the indirect channel, and re-characterized its credit tiers. Risk tiers 1-4 are still considered prime, while tiers 5-10 are considered near prime, and risk tiers 11 and above are subprime. Previously, tiers 5-10 were considered near prime and 8-10 were dealer special and limited credit, or subprime.
As for how the underlying loans fall within the credit tier distribution, prime loans account for a higher percentage, 16%, than the FCRT 2023-1 and 2022-2, which had 12% and 11%, respectively.
KBRA expects to assign ratings of 'K1+' to the A-1 class of notes; 'AAA' to the A-2 class; 'AA+' to the class B; 'A' to the class C notes; 'BBB' to the class D notes and 'BB' to the class E notes. As for S&P, the rating agency expects to assign 'A-1+' to the A-1 notes; 'AAA' to the A-2 notes; 'AA-' to the class B notes; 'A-' to the class C notes; and 'BBB' to the class D notes.
