Prime auto lenders add $3.4B to ABS pipeline
Ford Motor Credit, GM Financial and Fifth Third Bancorp are marketing a combined $3.4 billion in prime auto loan and lease asset-backed securities, according to presale reports published Thursday.
Ford Motor is planning its second securitization of retail auto loans through a revolving trust this year in a $1.35 billion transaction. GM Financial’s latest auto lease receivables securitization totaling $1 billion is its third lease-backed transaction for 2017.
Meanwhile, Fifth Third is prepping a $1.01 billion offering of auto loan ABS, its first transaction since 2015, and 11th overall.
Ford Credit Auto Owner Trust 2017-REV2 includes a $1.25 billion Class A series carrying preliminary triple-A ratings from Fitch Ratings and Moody’s Investors Service. The senior notes carry 9.5% initial hard credit enhancement consiting of 7.5% subordination and a 2% funded reserve account – unchanged from the revolving trust’s initial 2017 issuance in February, in another $1.35b transaction.
It is the eight securitization under the Ford Credit Revolving Extended Variable-utilization program, according to Moody’s.
Unlike deal issued from Ford’s static securitization shelf, FCOAT has a five-year revolving period in which eligible additional receivables can be sold into the trust. Accounting for those potential future receivables, Fitch expects cumulative net losses to reach 2.45%, in its base case scenario.
Moody’s only expects cumulative net losses to reach 1.75%.
The collateral consists of contracts for primarily new auto, light-truck and utility vehicles with an aggregate principal balance of $1.94 billion.
The weighted average FICO for borrowers is 736, also unchanged from the previous deal from this trust.
As with other recent FCAOT transactions, Ford there is a high concentration (56.4%) of loans with terms of five years or longer. The weighted-average original term for these loans is 65 months, with an average nine months of seasoning.
GM Financial Automobile Leasing Trust (GMALT) 2017-3 is the captive lender’s 11th term securitization of close-end prime retail auot leases.
Four senior tranches of notes will be issued: a $134 million money-market tranche with a preliminary F1 rating from Fitch; a $350 million split floating/fixed-rate tranche of A-2 notes; a $310 million A-3 class due 2020 and an $84.7 million series of A-4 notes due 2021. All of the term notes carry AAA ratings, and are supported by 19.9% initial credit enhancement (a level consistent with the last two GMALT transactions). The CE is expected to grow to 27% before peak residual maturities occur in early 2019.
All pay a fixed rate of interest, except for the Class A-2-B floating rate series, which will be no more than $175 million, according to Fitch.
The pool includes 45,285 leases with an average value of $24,073.
According to Fitch, the pool has highest average FICO of any deal from GMF to date, at 760. I also has the highest concentration of crossover sport utility vehicles, 49.04%.
But the deal has a higher-than-average concentration of leases coming due toward the end of the deal's term: 68.4% mature during or after the second half of 2019. That has a residual value composition (the estimated ratio of the future residual value to the current pooled asset value) of 73.1%, the highest of any GMALT transaction since GMF began securitizing lease receivables in 2010, according to Fitch.
This adds to the risk of the deal because the increased risk that vehicles coming off lease later in As in other U.S. auto ABS lease deals, worries abound of long-term lower wholesale used-car values due to increased off-lease vehicle supply and rising production levels of new models.
Fitch has an expected net credit loss is 1.15%, similar to GMALT 2017-2.
JPMorgan was the underwriter for GMF.
Fifth Third Auto Trust 2017-1 is the Cincinnati bank’s first securitization of new and used prime auto loan origination since 2015.
Four classes of senior notes will be issued in the transaction: a $221.42 million Class A-1 money-market tranche with a preliminary P-1/A-1 ratings from Moody's/ S&P, a split tranche of Class A-2 fixed- and floating-rate notes sized at $182.4 million and $121.6 million, respectively; a $390 million Class A-3 tranche due 2022 and a $95.48 million Class A-4 tranche due 2024.
All of the term notes are rated triple-A by Moody’s and S&P.
Initial credit enhancement will be 4.5% (a slight bump from 4.25% two years ago), and increase to a target of 5%.
Moody’s has a cumulative net loss expectation of 0.65% on the senior notes; S&P’s range of 0.65%-0.75%.
The loans backing the notes have an average FICO score of 754 (with a minimum of 650), and a strong weighted average loan-to-value ratio of 91%. The deal is split between new- and used-car loans. All are characteristics in line with Fifth Third’s last transaction, reflecting the bank’s conservative underwriting practices (the annualized net loss of the bank’s $8.6 billion managed portfolio of auto loans is just 0.32% for the six months ending June 30). The pool has an average seasoning of 13.5 months, down from 15.4 months in the 2015 transaction.
But Fifth Third, which has now undertaken 10 auto-loan securitizations, is taking on added risks: over 40% of the pool includes loans with original terms between 73 and 84 months, a level that usually produces higher losses on average and longer exposure to potential negative credit events.