Southern Auto Finance is returning to the securitization market with its third deal, aiming to raise $200 million through the SAFCO Auto Receivables Trust, series 2025-1.
Fixed-rate installment loans extended to first-time car buyers and those with hard-to-verify income, back the SAFCO 2025-1 notes. Southern Auto Finance uses a heavily automated origination process that puts applicants through several rounds of income, employment and financial reserves verification.
SAFCO 2025-1's notes will repay investors sequentially, according to Kroll Bond Rating Agency.
The class A notes receive priority for principal payments before all subordinate notes, and after that classes B through E will receive principal payments. The deal structure also includes overcollateralization which starts at 1.00% of the initial receivables balance. That will increase to a target level of 4.00% of the current outstanding receivable balance.
Aside from the related subordination, the transaction benefits from a cash reserve account equal to about 1.50% of SAFCO's initial pool balance. There is also excess spread, which comes to 10.69%, minus servicing fees, KBRA said.
Analysts at S&P Global Ratings weighed in, saying the A, B, C and D notes have 35.44%, 26.96%, 21.43% and 15.85% in available credit support, respectively. S&P says its levels of support provide at least 3.12x, 2.87x, 2.17x and 1.69x coverage, respectively, of its cumulative net loss. The rating agency expects that to be about 9.25%, it said.
For its part, S&P says total initial hard credit enhancement—including subordination, overcollateralization—decreased compared to the SAFCO 2024-1 deal, while the reserve account was unchanged. Pre-pricing excess spread was a little higher, due to a lower weighted average (WA) cost of debt, S&P said.
There were some collateral changes, too, S&P said. The principal balance was $23,342 on average and the loan-to-value ratio increased slightly 108.54%, compared with 108.10% on the SAFCO 2024-1.
On a WA basis, the collateral's Vantage score was 609, up from 601, and the percentage of loans without a Vantage score ebbed a little bit to 52.84%, from 56.20%.
S&P assigned ratings of AA, AA-, A- and BBB- to classes A, B, C and D, respectively. KBRA assigned ratings of AAA, AA-, A-, BBB- and BB to the class A, B, C, D and E notes, respectively.
