The Pentagon Federal Credit Union is sponsoring its first retail auto loan asset-backed securities deal, the PenFed Auto Receivables Owner Trust, 2022-A, raising $484.5 million collateralized by new and used automobiles and light trucks.
The 26,692 collateral loans in the deal, known as PAROT, 2022-A have a weighted average (WA) FICO score of 770. Scores above 750 total 65.7% of the pool, while only 10.9% of the obligors have a FICO score below 700, according to Fitch Ratings. J.P. Morgan Securities serving as the lead arranger. PenFed Auto Receivables Funding is the depositor.
On average, the loans have a balance of $19,475, with a WA remaining term of 47.7 months and some 18.4 months of seasoning.
Fitch notes that PenFed's managed pool has had strong performances since 2017, improving on a year-on-year basis through 2021, a reflection of "PenFed's tighter underwriting guidelines and the quality of its originations starting from 2017 through," Q4 2021, according to the rating agency.
The notes have initial hard credit enhancement in the form of junior note subordination, and a non-declining 0.50% reserve account, Fitch said. The notes also benefit from a yield supplement overcollateralization amounting to about 6.7% of the total balance. Yield supplement overcollateralization adjusts the weighted average APR from approximately 3.8% to 7.5%. Excess spread is also available, at about 1.63%, as a result of adjusted APR.
Fitch expects to assign ratings of F1 on the $139 million A-1 tranche, and 'AAA' on the A-2 through A-4 tranches. Those notes have a credit enhancement level of 7.40% on the four senior classes. After that, Fitch will assign a rating of 'AA' to the $10.9 million, class B notes; 'A' on the $12.8 million, class C notes and 'BBB' on the $9.2 million class D notes.
Maturity dates range from September 2023 through June 203.
The pool appears to be diversified, especially geographically. The top five states for the loan distribution account for 44.6%. California and Texas both account for 10.0%, while Virginia, Florida and Maryland account for 9.8%, 9.45 and 5.4%, respectively.
New cars account for 44.1% of the pool, while used vehicles account for 55.9%.
