Prestige Financial Services is in the market with a $350 million securitization of subprime auto loans, its 14th since 1996, according to a pre-sale from Dominion Bond Rating Service (DBRS).
The deal contains two triple-A tranches, one for $191 million and another for $60 million, as well as an ‘R-1 (high)’ rating for a $36-million short-term piece. The highest rated notes have a credit enhancement of 19.82%.
The collateral consists of sub-prime automobile loans secured by new and used automobiles, vans and light-duty trucks.
The company’s niche is potential obligors who have recently declared bankruptcy. Close to 30% of the receivables in the pool are linked to obligors who were in chapter 7 bankruptcy when they received their loans, while about 11% were connected to those in chapter 13.
DBRS said the company’s management has a “great deal of experience” lending to this high risk segment. While these borrowers would be toxic to more selective lending institutions, according to the agency they have characteristics that mitigate their poor credit profile. These include “relatively stable employment, income and residential history.”
The APR on the portfolio is a steep 18.43%.
Utah-based Prestige was founded in 1994 and funds loans for purchases through 1,200 dealers. It forms part of the Miller Group.