GM Financial, the captive auto-financing arm of General Motors, sold all but the class A2 notes of its sophomore auto lease securitization at wider spreads relative to its inaugural deal completed in March.

The $1 billion Series 2015-2 transaction is backed by a pool of retail closed-end vehicle leases made to prime and non-prime borrowers, all of which finance new GM affiliated brand vehicles. J.P. Morgan is the lead underwriter.

Standard & Poor’s assigned preliminary ratings of ‘AAA’ to four classes of senior notes that benefit from credit enhancement of 26.1%. The 1.46-year class A2A notes pay 42 basis points over the Eurodollar synthetic forward curve; the class A2B notes pay 42 basis points over one-month Libor; the 2.53-year class A3 notes pay 52 basis points over interpolated swaps; and the 3.-year class A4 notes pay 55 basis points over swaps.

At the subordinate level, the 3-year,  ‘AA’ rated class B notes with credit support of 22.6% pay 110 basis points  over swaps and the 3-year, ‘A’ rated notes with credit support of19.3% pay and 165 basis points over swaps. GM retained the 3-year, ‘BBB’ rated class D notes.

The class A2 notes were the only ones to price in line with GM’s 2015-1 transaction; all other tranches priced 6 to 40 basis points wider.  Widening was most pronounced at the subordinate level tranches. GM sold the 3-year class C notes 40 wider that the class C notes sold under 2015-1, the class B notes priced 20 basis points wider.

The more expensive pricing levels come despite GM Financials efforts to improve the collateral pool.  For example the weighted average FICO increased to  739 compared to 736 in the issuer previous transaction, GMALT 2015-1.

The pool backing the latest deal also has a greater percentage of leases with terms of 36 months or less: 34.9% compared with 28.1%. The percentage of leases with an original term of 37-48 months decreased to approximately 65.1% from 71.9%. Leases with 48-month terms typically have higher credit losses than 36-month leases.

GM Financial's total U.S. portfolio of retail lease contracts consisted of 291,005 contracts totaling approximately $8.036 billion for the three months ended March 31, 2015.

Since 2012, the issuer’s lease portfolio has experienced “very strong growth”, more than doubling its value each year, according to S&P. “We expect continued strong growth given that GM Financial is now the exclusive lease provider across all GM brands,” stated the presale.

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