Nissan, Toyota and Ally are marketing a combined $3.35 billion to $4.41 billion of prime auto asset-backeds, depending on demand, in their first deals of 2019.
The three offerings launched Thursday add to the $3.9 billion of prime auto supply already issued this year by General Motors, Ford Motor Co. and CarMax.
Nissan Motor Acceptance is planning either a $1 billion or $1.25 billion offering of notes backed by loans originated for Nissan and Infiniti dealers. Moody’s Investors Service expects losses over the life of the deal to be slightly higher than the sponsor's prior securitization, completed in November, because the credit metrics are weaker and because the performance of outstanding asset-backeds is deteriorating.
Toyota has a $1.25 billion deal that could potentially be upsized to $1.75 billion; it is backed by a pool of loans with shorter average terms that those of its prior transaction as well as increased seasoning.
Ally Financial returns with a $1.1 billion deal backed by loans with shortest seasoning of almost any recent Ally owner trust transaction.
Nissan
Deteriorating performance in the collateral for Nissan’s recent securitization led Moody's to expect higher losses on its next $1 billion or $1.25 billion transaction. The rating agency is calling for cumulative net losses of 1.1% for Nissan Auto Receivables 2019-A Owners Trust (NAROT), up from the 1% level from Nissan’s 2018-C transaction issued in November - but well short of the highest levels seen on this platform.
Credit metrics of the latest deal are also weaker than those of recent NAROT deals. That includes a lower proportion of its top Tier 1 borrowers within the pool (64.96% from 67.97% in NAROT 2018-C), coupled with a doubling in the pool’s share of borrowers from Nissan’s second-lowest internal credit tier. Those Tier 5 borrowers make up 6.5%, compared to 3.25% in NAROT 2018-C.
Moody’s also pointed to the lower weighted average FICO (771) and a near-all-time high 68% share of loans with term loans of over 60 months. (Loans over five years have historically higher levels of defaults and credit losses, according to ratings agencies).
Fitch Ratings also cited the “slightly higher” 14.4% concentrations of borrowers with FICO scores below 700 as a concern; however it maintained the 1.15% base case loss proxy it previously projected for NAROT 2017-C and 2017-B, the last two Nissan transactions rated by Fitch.
In both proposed pools, the NAROT 2019-A pool will have four classes of triple-A notes with 4.25% credit enhancement. including a $360 million Class A-2 tranche due January 2022 divided between fixed- and floating-rate tranches (the variable-rate notes will not exceed 50% of the A-2 tranche balance); a Class A-3 tranche sized at $360 million due October 2023; and a $70 million Class A-4 notes tranche due 2025. A Class A-1 money-market tranche is set at $210 million.
The upsized totals would be $263 million for the A-1 notes, $450 million each for the A-2 and A-3 notes, and $87 million for the A-4 bonds.
The transaction will include either 48,434 loans with an outstanding balance of $1.17 billion, or 60,489 accounts with $1.47 billion due, if upsized. The loans have weighted average original terms of 67 months, after 11 months of seasoning.
Over 94% of the pool includes new vehicles, with crossovers (50%) representing the largest vehicle-type concentration. Passenger sedans make up 32% of the pool, followed by SUVs (10%) and trucks (8%).
Another potential knock on the deal is the unhedged floating-rate notes, which could eat into the deal’s annual excess spread in a rising rate environment.
NMAC’s managed portfolio had $27.5 billion in outstanding principal balances at the end December, with slightly higher delinquency rate (2.06% for 30- to 60-day late-pays) and net losses (1.42%) than 2017 year-end figures (1.81% and 1.3%, respectively).
MUFG is the lead underwriter.
Toyota
Toyota Motor Credit Corp. is pooling fewer loans with extended terms and increased seasoning in its first 2019 securitization of new- and used-car loan originations through its Toyota Auto Receivables Owner Trust (TAROT) platform.
The 2019-A securitization trust will issue $1.25 billion, or $1.75 billion if upsized, according to presale reports from S&P Global Ratings and Moody’s.
The Toyota Auto Receivables 2019-A Owner Trust will have a “marginally” reduced number of loans with original term lengths of 65.9 months from the 2018-D and 2018-C transactions issued last year. But that is above the rates from the first two transactions of 2018 as well as 2017 issues from the TAROT shelf.
The percentage of loans with original terms between 61-72 months for TAROT 2019-A is 55.42% of the principal account balance of the collateral, down from 56.17% in TAROT 2018-D.
The weighted average seasoning has increased slightly to 15.1 months from 14.6 months, as well.
No loans extending beyond six years are included.
The average loan balance is over $19,000 for each pool, with a weighted average (WA) APR of 2.32% and WA terms of 65.9 months. The WA FICO is 762, similar to the previous 2018-D transaction. New cars are up slightly to 82.3% from 80.8% in 2018-D pool.
Four tranches of AAA/Aa1 rated notes will be issued in the deal. The Class A-1 fixed-rate notes due May 2020 are sized at $307 million (or $430 million in the upsized pool); a Class A-2 tranche totaling $420 million (or $588 million upsized) due October 2021 will be split between fixed- and floating-rate notes; a $421.75 million (or $590.5 million) Class A-3 tranche has a four-year legal maturity; and the Class A-4 notes totaling $70 million (or $97.75 million) are due May 2024.
The triple-A rated notes carry 2.75% credit enhancement, unchanged from recent TAROT deals.
A $31.25 million (or $43.75 million) subordinate Class B tranche is also included. Those notes will carry a 0% interest rate, according to S&P.
MUFG Securities is the lead underwriter.
S&P is maintaining the 0.55%-0.65% loss range consistent with recent TAROT transactions. Moody’s has a 0.6% expected loss rate, also unchanged from 2018-D. Outstanding TAROT series securities from 2015 through 2017 have a projected loss rate of 0.4%-0.65%.
Toyota Motor Credit’s $53.2 billion managed portfolio (the average size in 2018 through September) has experienced a decline in annualized net losses to 0.46% from 0.54% from the year prior, and repossessions down to 1.13% from 1.15%.
Ally
Ally Financial's first securitization of the year pools loans with less seasoning than any deal it has completed in the past five years. The $1.1 billion Auto Receivables Trust (AART) 2019-1 collateral pool has a weighted average seasoning of just 9.45 months; by comparison, prior deals since late 2016 that had loans with than a year’s worth of payments behind them.
Seasoning in AART 2018-3, for instance, was the second-highest since 2014 at 14.21 months, preceded by the 13.58-month average of AART 2018-2. Pools with more seasoned loans have longer payment track records for the underlying assets, generally reducing risk levels for potential defaults more prevalent in newer loans.
The lack of seasoning means that loans in the collateral pool have among the highest average loan-balance rates ($16,918) the trust has experienced since 2016.
Three term tranches of triple-A rated notes will be issued The Class A-2 notes due December 2021 are $369 million, as are the Class A-3 notes with a four-year maturity. The Class A-4 notes offering is sized at $75.3 million and due April 2024. In addition, Ally will offer a $244 million money-market notes with a preliminary F1+ rating from Fitch Ratings and P-1 from Moody’s, and three subordinate classes totaling $52.8 million.
The triple-A credit enhancement level is unchanged at 5.85% from the prior AART transaction. Fitch expects cumulative net losses of 1.25%, and Moody’s 1% loss expectation is unchanged from the AART 2018-3 pool.
With a projected higher weighted average bond coupon anticipated for the offering, Fitch says the projected annual express spread of 2.54% is “up notably” from recent Ally transactions from its prime shelf: 1.82% on AART 2018-3 and 1.7% on 2018-2.
The transaction has an aggregate receivables pool balance of $1.12 billion across 66,201 loans, with an average balance of $16,918. The weighted average APR is 6.93%; loan-to-value ratio is 93.39% and the WA borrower FICO is 735, in line with AART deals since 2015.
The pool’s weighted average original terms of 66.1 months is unchanged from the prior deal, with nearly 68% of the loans had terms over five years. New cars make up 70.3% of the AART 2019-1 pool.
The vehicle-type concentration increased for passenger cars 32.85% of the pool compared to 31.21% in AART 2018-2. Light-duty trucks remained the largest category at 67.15% of the pool, although for the first time since 2014, GMC-branded trucks have not been among the top three models for the former preferred lender for General Motors.
The Chevy Silverado remains the top model in the pool making up 7.89% of the pool’s concentration, followed by the Dodge Ram pickup at 4.39%. Dodge vehicles remain a dwindling portion of Ally pools, falling to just 3.6% from 22.3% in 2011 when Ally served as a preferred lender for Chrysler, as well.
The WA APR increased to 6.93% from the previous deal, and continues an upward trend on the trust’s average APR rates in pools, due to declining levels of manufacturer financing subsidies Ally receives to support promotional-rate subvented contracts of higher-FICO borrowers.
The percentage of subvented contracts is only 0.3% of the loan balances, compared to 2% in the AART 2018-3 pool and 2.1% in the 2019-2 pool.
(Although lacking manufacturer captive-finance status, Ally maintains thousands of legacy dealer-financing arrangements and regularly securitizes floorplan inventory financing to its network. Ally Financial on Thursday made a regulatory disclosure filing of its next floorplan ABS through its Ally Master Owner Trust platform.)
JPMorgan, Barclays and RBC were lead arrangers on the AART transaction.
