Space Coast Credit Union (SCCU) is preparing to sponsor its first asset-backed securities deal, raising $331.7 million from investors, which it will repay with revenue from a pool of motor vehicle loans and installment sale contracts.
Citigroup Global Markets and J.P.Morgan Securities are lead underwriters on the 144a securitization, which is expected to close by December 15, according to ratings analysts from Moody's Investors Service and S&P Global Ratings. The structure will repay investors on a senior-subordinate basis, with legal final maturity dates ranging from Nov. 15, 2024 on the A1 notes through Nov. 17, 2031, rating agencies said.
The underlying contracts were extended to prime quality borrowers. On a weighted average (WA) basis, the collateral pool has a score of 770, Moody's said.
This is SCCU's first securitization deal, and it is acting as servicer, so the lack of a securitization portfolio performance history does present a potential credit challenge, Moody's said. All of the obligors, meanwhile, are based in Florida, which definitely exposes the pool to Florida-specific regional economic disruptions or other idiosyncratic risks, Moody's said. In another note of caution, the National Credit Union Administration insures Space Coast's deposits, with the power to repudiate contracts or re-characterize receivables, potentially reducing or delaying payments to the notes, Moody's said.
S&P did note, however, that the classes A, B, C and D notes have 13.25%, 10.11%, 7.28% and 5.71% in hard credit enhancement and haircut to excess spread. For its part Moody's puts the total initial hard credit enhancement levels at 9.88% on all of the class A notes; and 6.34%, 3.00% and 1.25% on the class B notes.
Credit support levels provide coverage of at least 5.05x, 4.10x, 3.15x and 2.25x on classes A, B, C and D notes, respectively, that folds into S&P's cumulative net loss expectation of 2.20% for the notes, the rating agency said. Also, Moody's points out that all of the notes benefit from a 0.25% reserve fund.
Moody's says it intends to assign ratings of 'P1' to the A1 notes; 'Aaa' to the A2 through A4 notes; 'Aa1' to the class B notes; 'A2' to the class C notes and 'Baa3' to the class D notes. S&P intends to assign ratings of 'A1+' to the A1 notes; 'AAA' to the rest of the class A notes; 'AA' to the class B; 'A' to the class C and 'BBB' to the class D notes.
