Nissan Motor Acceptance Corp. (NMAC) is increasing the investor protection on its latest offering of bonds back by auto leases to account for the impact of falling used car prices.

NMAC is marketing $1.199 billion of bonds backed by auto leases, according to rating agency presale reports. The transaction, Nissan Auto Lease Trust 2017-A (NALT 2017-A), will issue four tranches of notes rated triple-A by Fitch Ratings and Moody’s Investor Service with maturities ranging from mid-June 2018 to mid-September 2022. All four tranches benefit from 17.5% credit enhancement.

Bloomberg News

That’s up 100 basis points from NMAC’s previous transaction, NALT 2016-B. And the highest for any transaction since the second one completed in 2013.

In its presale report, Fitch said the increase was driven by deterioration in the value of some models of cars when they come off lease.

Fitch noted that credit losses have been increasing since 2014. For NALT 2017-A, Fitch predicts a credit loss proxy of 0.90%, while Moody’s expects credit losses of just 0.50%.
The notes are backed by leases on Nissan and Infiniti vehicles manufactured by Nissan Motor Co According to Fitch, the average FICO score of 747 amongst lessees is in line with previous NAMC securitizations.

Car lease exposure in NALT 2017-A is consistent with NALT 2016-B, accounting for 44.41% of the collateral. The remainder of the transaction is backed by SUV/CUV (53.02%), truck (2.44%), and van (0.03%) leases. This is the third highest concentration of SUV/CUVs in a NALT securitization to date, which Fitch attributes to rising demand caused by lower gas prices and increased fuel efficiency for those types of vehicles.

NMAC is a frequent issuer of lease-backed securities. Since 2009, it has completed two deals per year. Prior to that, it issued one new transaction per year since 2000. Fitch noted that transactions from 2009-2016 performed significantly better than transactions from 2000-2008. Unsurprisingly, performance was weakest during the crisis era.

NMAC is a subsidiary of Nissan North America, the primary distributor of Nissan and Infiniti vehicles in the United States. Both are headquartered in Nashville, TN.

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