Barclays Capital last week introduced the inaugural quarterly research piece titled The Smart Guide, focusing on characteristics of the 15 leading prime retail auto loan ABS issuers, which is expected to expand into the subprime arena issuers throughout the year. The 82-page tome offers investors four-page snapshots of the Big Three plus five foreign captives, three independent finance companies and three bank-affiliated auto lenders that are programmatic issuers in the term markets.
The Smart Guide released last week highlights the issuance vehicles of BMW Motor Co., Capital One Financial (prime only), CARMAX Inc., Chase Manhattan Bank, DaimlerChrysler N.A., Ford Motor Credit, American Honda Finance, Hyundai Motor Credit, Mitsubishi Motor Credit, National City Bank, Nissan Motor Credit, Toyota Motor Credit, USAA and World Omni Financial.
"In future editions look for expansion into the prime universe of auto ABS issuers as well as subprime issuers and even the dealer auto whole loan shelf deals," said Barclays director Joe Astorina. "The goal is twofold - to cover frequently traded names but also to add value by covering the less-frequently traded names that investors see only periodically," he added.
National City Bank, which has only issued two term auto loan ABS transactions to date, the second of which priced earlier this month, and USAA, typically a once-per-year issuer, are examples of the latter. Astorina acknowledged, however, the difficulties in covering dealer whole loan deals, as the collateral for each offering can come from varying originators and are serviced by multiple servicers.
In addition to the issuer profiles, Barclays looks at the sector as a whole, recapping performance statistics such as delinquencies and losses, recovery rates and prepayments. In its analysis, Barclays predicts that although they are currently higher than historical averages, new transactions should exhibit more typical delinquency and loss characteristics.
"As recoveries improve, we expect cumulative net losses on 2003 and 2004 originations to return to levels that are closer to the historical average," researchers pen.
In its issuer profile section, Barclays offers an overview of each captive lender's finance business, including its parental relationship and what asset classes it securitizes. Servicer operations are laid out, particularly credit scoring and repossession procedures.
Barclays outlines each seller's past issuance, featuring historical pricing, issuance patterns and how these factors impact value. BMW ABS, for example, "is enhanced by its scarcity value, making it a buy-and- hold security," researchers add.
Barclays also summarizes each issuer's collateral characteristics, including total loans and volume, the weighted average coupon, average remaining maturity and seasoning, new-to-used vehicle ratios and geographic distribution.
Barclays also recaps recent events surrounding the issuer, such as any rating changes either the issuer's outstanding ABS may have experienced, or its corporate parent.