Nissan Motor Co. is marketing its first auto loan securitization of the year.
The $1.04 billion Nissan Auto Receivables 2014-A Owner Trust, will issue four tranches that benefit from credit enhancement of 4.25%, according to a regulatory filing and rating agency reports.
Bank of America Merrill Lynch is the underwriter.
A $219 million money market tranche has a preliminary F1’ rating from Fitch Ratings. There are also three tranches with preliminary AAA’ ratings: a $330 million tranche maturing in November 2016, a $351 million tranche maturing in August 2018 and a $100 million tranche maturing in August 2020.
The notes are backed by receivables from loans for new and used Nissan and Infiniti cars and light-duty trucks manufactured by Nissan and originated and serviced by NMAC. According to Fitch, the collateral composition and credit quality of the latest deal is generally consistent with pools backing Nissan’s prior deals. The borrowers have a weighted average FICO score of 762, new vehicles representing 92.53% of the pool and it is geographically diverse.
However, loans with terms over 60 months have increased to 52.28%, which Fitch says is the highest level to date, and 7.72% of loans have original terms of 7375 months, This is the second transaction to include loans with 7375 month terms.
Longer-term loans are considered to be riskier not just because they increase the risk of borrowers going into financial distress but also because they generally amortize at a slower rate. Since vehicles depreciate rapidly, slower amortization increases the risk of loss in event of a default, since the car may not be worth as much as the balance of the loan.
Nissan completed three auto loan securitization in 2013; the most recent one, which priced in December also included loans with 73-75 month terms. It was originally sized at $833 million but was downsized to $800 million.