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Toyota, Fifth Third marketing up to $3.1B in new prime auto ABS deals

Toyota Motor Credit Corp. and Fifth Third Bancorp’s auto lending arm are adding up to $3.1 billion in new prime-auto loan securitization deals into the ABS pipeline, according to presale reports.

Toyota plans to market either $1.25 billion or an upsized $1.75 billion package of notes backed by new- and used-car receivables, in its second auto-loan securitization for the year. Fifth Third is launching its first prime auto-loan securitization in two years with a $1.37 billion offering.

Prime auto-loan lenders have issued $18 billion in deals so far in 2018, including two apiece by Ford Motor Credit, CarMax and GM Financial, according to Finsight.com.

Toyota Auto Receivables 2019-B
Toyota Motor Credit Corp.’s 44th securitization of new- and used-auto loans will be its second securitization of the year, and will be at least $1.25 billion. The captive-finance lender is considering upsizing to a $1.75 billion pool for Toyota Auto Receivables Owner Trust (TAOT) 2019-B, similar to its first issuance of the year in February.

The transaction will include four tranches of Class A notes with preliminary triple-A ratings from Moody’s Investors Service and S&P Global Ratings. Those include the Class A-1 tranche that, despite having a near-term maturity of August 2020, were not assigned short-term ratings affiliated with money-market tranches.

Class A-1 will consist of either $316.01 million or $442.01 million in notes, depending on the upsizing decision. The Class A-2 tranche will have $443.8 million or $621.6 million of three-year fixed- and floating-rate notes due February 2022; the Class A-3 notes will be $368.9 million or $516.6 million, and due August 2023; and the Class A-4 notes will be $90.04 million or $126.04 million, with a November 2024 final maturity. All notes are backed by 2.75% credit enhancement, similar to recent TAOT transactions.

A double-A rated Class B subordinate note tranche is to be sized at either $31.25 million or $43.75 million.

ASR_Toyota1025
FILE: The Toyota Motor Corp. badge is seen on an Esquire vehicle displayed at the company's office in Tokyo, Japan, on Tuesday, Feb. 6, 2018. For BMW AG, Tesla Inc. and other global automakers whose future is ever-more dependent on China’s burgeoning market, any gains from lower import tariffs this week will likely be short-lived -- thanks to President Donald Trump’s trade war. Unless President Trump backs down, on July 6 the U.S. will impose tariffs on $34 billion of Chinese imports, many of them parts used in products such as marine engines and power turbines. China will impose countervailing levies the same day -- including on U.S.-manufactured cars. Our editors select archive images of the leading brands affected by the trade war. Photographer: Akio Kon/Bloomberg
Akio Kon/Bloomberg

The $1.75 billion pool will be backed by a portfolio of $1.9 billion across 102,324 loans, while the smaller pool consists of 72,945 loans with a securitized balance of $1.36 billion. Both pools have a preponderance (82%) of new-car loans, plus a borrower weighted average FICO of 761 and APR of 2.56%.

Either pool also has equal share (39% each) of passenger sedan and sport utility vehicle collateral.

The only credit challenges to the deal noted by Moody’s was the high proportion of extended-term loans (61-75 months), which make up 55% of the pool balance, and an interest-rate exposure to the floating-rate Class A-2B notes. S&P noted that the percentage of loans with original terms between 61-72 months declined to 19.71% from 22.84% in the prior deal.

All of the loans were drawn from Toyota Motor Credit’s managed portfolio that ended 2018 with $53.3 billion in accounts. Delinquencies declined to 2.14% from 2.44% the year prior, reversing five consecutive years of rising levels of 30-plus day late-pays. Net losses declined year-over-year as well (to 0.49% from 0.57%).

Moody’s expected net losses of 0.6% and S&P projected net loss range of 0.55%-0.65% are each unchanged from the trust’s recent transactions. Loss ranges in outstanding TAOT securitizations from 2014-2017 are ranging between 0.4%-0.7%, among the lowest in the industry, according to Moody’s.

Bank of America Merrill Lynch is the underwriter.

Fifth Third Auto Trust 2019-1
Fifth Third, via Credit Suisse, will market $1.37 billion in senior notes in its first prime auto-loan securitization since September 2017 and the regional bank’s 12th overall asset-backed deal from the platform.

Fifth Third Auto Trust 2019-1 will include a $300 million offering of money-market notes due May 2020; a $500 million tranche of fixed- and floating rate notes due May 2022 that make up 34.88% of the pool balance; a Class A-3 tranche of notes totaling $430 million due December 2023; and a $139.7 million in Class A-4 notes due November 2026. All the bonds benefit from 4.7% credit enhancement.

The term notes are all triple-A rated. The one year notes carry the preliminary P-1 short-term rating from Moody’s and A-1+ from S&P.

Moody’s cumulative net loss expectation is 1%; S&P’s loss range expectation is lower at 0.65%-0.75%.

Fifth Third’s loan pool has a high weighted average FICO of 755, an average original term of 69 months and an average loan-to-value of 92% on 80,027 loans with a total balance of $1.43 billion.

The FICO, original term and LTV levels are similar to Fifth Third’s $1.06 billion deal in 2017, but the weighted average APR is higher at 5.77%. The loans, with an average remaining size of $17,918, are seasoned an average of 11 months, according to presale reports.

The pool is split between 47% new-vehicle and 53% used-car collateral.

As of Dec. 31, Fifth Third Bancorp’s auto lending subsidiary held approximately $8.4 billion in receivables.

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