Global Lending Services is marketing its first public securitization of auto loan receivables, according to Kroll Bond Rating Agency.
The lender has completed one other deal, for $136.8 million, in 2014 that was privately placed and unrated.
The new deal, GLS Auto Receivables Trust 2015-1 offers $97 million class A notes rated A,’ $20.4 million class B notes rated BBB,’ and $19.3 million unrated class C notes. The class A and B notes are due December 15, 2020, while the class C notes reach final maturity October 15, 2025.
The senior tranche benefits from 36.25% initial hard credit enhancement (CE); the class B and C notes benefit from 22.5% and 9.5% initial hard CE, respectively.
Wells Fargo is serving as the indenture trustee, backup service, and custodian for the transaction.
The pool is comprised of 8,367 loans issued to subprime borrowers. New car loans make up 21.22% of the pool, while the remaining 78.78% of the pool consists of used vehicles.
The loans have a weighted average (WA) remaining term of 62 months, and a WA seasoning of seven7 months. Borrowers in the pool have a WA FICO score of 555, which is Kroll considers to be a key weakness of the transaction.
Other risk factors of GLS Auto Trust 2015-1 are the high WA loan-to-value ratio of the pool at 122.57% and the limited experience of the loan originator. GLS was founded in 2011 and started originating loans in August 2012. Despite the general riskiness associated with young companies, the members of the management team have valuable experience in investment banking, analytics, and auto finance.
A key strength that is being considered in the transaction is the company’s backing by Blue Mountain and chairman, Doug Duncan. Blue Mountain invested $80 million in GLS, while Duncan invested an additional $25 million. GLS is known for its unique sales agent model, which uses 80 sales agencies to employ nearly 200 agents to sell ancillary products. According to Kroll, these agents generally have stronger sales relationships than traditional lender sale organizations.
The structure of the transaction is also considered to be a strength of the pool, as it is designed to de-lever and increase CE over time.