Oregon Community Credit Union is sponsoring its first asset-backed securities (ABS) deal, a $276.3 million deal secured by a pool of direct and indirect loans on prime-quality motor vehicle loans, as well as retail installment sale contracts.
A range of vehicles, including light duty trucks, sport utility vehicles and vans, which are both new and used, will make up the collateral pool, according to a pre-sale report from Moody's Investors Service.
OCCU has been in business since 1956, and has been servicing loans that it had originated for more than 65 years, something that Moody's sees as a potential credit strength. Compared with bank and captive issuers, however, OCCU has a relatively small platform. Auto loans comprised 62% of OCCU's total assets, which total $3.2 billion.
In another plus the transaction, OCCU Auto Receivables Trust, 2022-1, has a collateral pool with a weighted average (WA) credit score 730, with a minimum of 620. Some 92.3% of obligors in the pool have a minimum credit score of 660.
Stifel, Nicolaus & Co. is the lead underwriter on the transaction, which will issue the notes through a senior-subordination structure.
As the notes work amortizes, toward a legal final maturity ranging from October 15, 2023 through March 15, 2031, the notes also have the opportunity to build up credit enhancement, according to Moody's. At closing, classes A1 through the class D notes benefit from hard credit enhancement. Such hard credit enhancement consists of over-collateralization, a non-declining reserve account and subordination, except for the class D notes, which do not benefit from subordination.
The notes could also benefit from excess spread, according to Moody's.
Yet Moody's did flag a number of potential credit concerns. For one, almost half of the pool balances securing OART202-1, some 49.9%, have original terms of 84 months, which is higher than many other auto loan transactions with Moody's ratings. Such longer terms expose the notes to potential negative credit events and macroeconomic factors as the notes amortize.
Still, there might be one mitigating factor that risk.
"The 84 months-loans in OCCU's managed portfolio have demonstrated strong performance relative to OCCU's loans with shorter original terms," analysts wrote in the report.
In another potential credit weakness, more than 92% of obligors are based in the states of Oregon or Washington. Concentration in only two states is significantly higher than other auto ABS deals.
Moody's expects to assign ratings of P-1 to the A-1 notes; 'Aaa' to the A-2 through B notes; 'Aa3' on the class C notes and 'Baa2' to the class D notes.
For its part, S&P Global Ratings says it intends to assign ratings of A-1+ to the A-1 notes; 'AAA' to the A-2 through A-4 notes; 'AA' and 'A' to the classes B and C notes; and 'BBB' to the class D notes.
Oregon Community Credit Union is sponsoring its first asset-backed securities (ABS) deal, a $276.3 million deal secured by a pool of direct and indirect loans on prime-quality motor vehicle loans, as well as retail installment sale contracts.
A range of vehicles, including light duty trucks, sport utility vehicles and vans, which are both new and used, will make up the collateral pool, according to a pre-sale report from Moody's Investors Service.
OCCU has been in business since 1956, and has been servicing loans that it had originated for more than 65 years, something that Moody's sees as a potential credit strength. Compared with bank and captive issuers, however, OCCU has a relatively small platform. Auto loans comprised 62% of OCCU's total assets, which total $3.2 billion.
In another plus the transaction, OCCU Auto Receivables Trust, 2022-1, has a collateral pool with a weighted average (WA) credit score 730, with a minimum of 620. Some 92.3% of obligors in the pool have a minimum credit score of 660.
Stifel, Nicolaus & Co. is the lead underwriter on the transaction, which will issue the notes through a senior-subordination structure.
As the notes work amortizes, toward a legal final maturity ranging from October 15, 2023 through March 15, 2031, the notes also have the opportunity to build up credit enhancement, according to Moody's. At closing, classes A1 through the class D notes benefit from hard credit enhancement. Such hard credit enhancement consists of over-collateralization, a non-declining reserve account and subordination, except for the class D notes, which do not benefit from subordination.
The notes could also benefit from excess spread, according to Moody's.
Yet Moody's did flag a number of potential credit concerns. For one, almost half of the pool balances securing OART202-1, some 49.9%, have original terms of 84 months, which is higher than many other auto loan transactions with Moody's ratings. Such longer terms expose the notes to potential negative credit events and macroeconomic factors as the notes amortize.
Still, there might be one mitigating factor that risk.
"The 84 months-loans in OCCU's managed portfolio have demonstrated strong performance relative to OCCU's loans with shorter original terms," analysts wrote in the report.
In another potential credit weakness, more than 92% of obligors are based in the states of Oregon or Washington. Concentration in only two states is significantly higher than other auto ABS deals.
Moody's expects to assign ratings of P-1 to the A-1 notes; 'Aaa' to the A-2 through B notes; 'Aa3' on the class C notes and 'Baa2' to the class D notes.
For its part, S&P Global Ratings says it intends to assign ratings of A-1+ to the A-1 notes; 'AAA' to the A-2 through A-4 notes; 'AA' and 'A' to the classes B and C notes; and 'BBB' to the class D notes.
