Two more subprime auto loan securitizations are being shopped this week by Prestige Financial Services and United Auto Credit Corp., according to rating agency reports.
Both sponsors have had to increase the credit support available to the senior notes to account for an increase in expected losses.
The $400 million Prestige Auto Receivables Trust 2015-1 will issue two classes of senior notes with preliminary AAA’ ratings from Standard & Poor’s, one maturing in February 2019 and the other in February 2021.
Wells Fargo Securities LLC and J.P. Morgan Securities LLC are the lead underwriters.
PART 2015-1 is Prestige's first securitization the series 2014-1 transaction, which closed in March 2014. Over the past year, the performance of both company’s outstanding securitizations and unsecuritized loans has worsened. As a result, S&P now expects cumulative net losses to be in the range of 11.25%-11.75%, up from 8.50%-9.00% originally.
The initial overcollateralization on the latest deal has increased to 3.50% of the initial pool balance from 1.61% in the 2014 transaction, while the target overcollateralization increased to 8.50% from 7.80%. The total credit support available to the senior notes has also increased, to 42.5% from 36.8% in the 2014 deal.
The collateral backing the latest deal is broadly similar to that of the 2014 deal. The annual percentage rate of the receivables has decreased to approximately 18.2% from 18.7%. The percentage of loans with longer terms, from 61-72-months, increased to approximately 90.9% from 90.0%.
The percentage of new vehicles increased to approximately 8.3% from 8.0%.
The deal is partly prefunded: collateral up to a value of approximately $83.0 million can be added during the prefunding period which will end on June 15, 2015.
United Auto Credit is also in the market with a $187.2 million deal, according to Kroll Bond Ratings.
United Auto Credit Securitization Trust 2015-1 will issue five tranches of notes with preliminary ratings from Kroll Bond Rating Agency; the senior $91 million AAA’ class maturing in February 2017 benefits from initial credit enhancement of 57.5%, nearly 15 percentage points higher than that of Prestige’s deal.
The enhancement is also higher than that of United Auto Credit’s 2013 deal, the last transaction rated by Kroll, reflecting higher expected losses.
Like Prestige’s deal, United Auto Credit’s transaction is partially prefunding; the sponsor will has acquired approximately $153.5 million, or 75% of the total collateral; the remaining 25% transaction is expected to be acquired during the first four months after the deal closes.
This transaction represents United Auto Credit’s fourth securitization since the company was restructured in 2008, its first securitization in 2015 and its eleventh securitization overall.
The UACST 2015-1 transaction is most similar to the sponsor’s 2014 deal in its collateral characteristics, with a weighted average loan balance of $7,411, interest rate of 23.76%, FICO of 552, loan-to-value ratio of 120% and original term of 40 months.