Stellantis Financial Services, an auto lender, is sponsoring a $1 billion auto securitization deal supported by a pool of prime quality retail auto loan contracts that it originated, and that carries slightly higher excess spread than the previous deal.
SFS Auto Receivables Securitization Trust, series 2024-2, will sell notes through six tranches of A, B and C classes of notes, according to ratings analysts at S&P Global Ratings and Moody's Investors Service. Deutsche Bank Securities is the lead underwriter on the deal, which is slated to close on May 22, according to S&P.
All four of the class A tranches benefit from total initial hard credit enhancement of 13.80%, while the B and C classes of notes are covered by 10.6% and 6.0% in initial hard credit enhancement. The notes, all of which are fixed rate, also benefit from a reserve fund representing 0.25% of the pool balance, Moody's said. As for the deal's timeline, the legal final maturity dates range from May 20, 2025 on the A1 notes to Feb. 20, 2032.
S&P notes that the notes have excess spread of 3.12%, higher than the 3.03% on the SFAST 2024-1 deal.
Several characteristics about SFS Auto Receivables improve the credit strength of the notes, according to Moody's. A highly experienced management team at Stellantis Financial Services, plus previous experience on 35 securitizations, beginning in 2000, selling notes to investors under the First Investors Auto Owner Trust and SFS Auto Receivables Securitization Trust programs.
As the pool amortizes, credit enhancement will increase, due to the capital structure's sequential payment priority.
For all of SFS' securitization experience, however, this deal is only SFAST's third prime-quality securitization. Such limited securitization performance data complicates the process of forecasting outcomes and losses, a potential credit challenge. As with other securitizations secured by revenues from loan payments on used cars, a decline in used vehicle prices is a risk to recovery rates.
Moody's assigns P1 to the A1 notes; AAA to the A2 through A4 notes; Aa1 to the class B notes; and A2 to the class C notes. S&P gives the A1 notes an A1+; AAA to the A2 through A4 notes; AA to the class B notes and A to the class C notes.
