Toyota Motor Credit Corp. is sponsoring a five-year revolving securitization of prime auto loans that will be supplied mostly by a pipeline of extended-term contracts excluded from its standard ABS platform.
According to presale reports, Toyota Auto Loan Extended Note Trust 2019-1 is a $1.07 billion transaction that will have a five-year revolving window. The $1 billion Class A tranche has a preliminary Aaa rating from Moody’s and AAA from S&P Global Ratings.
This is the first-ever issue from the extended-note shelf, and also the first time Plano, Tex.-based TMCC is adding a revolving feature to pool future captive-finance originations made through U.S. Toyota Motor Corp. dealers as the initial loans are paid down.
The collateral includes 54,385 loans with outstanding receivables balances of $1.13 billion. The weighted average borrower FICO is 754, with an average APR of 3.58%. Eighty percent of the pool is for new-vehicle loans directly originated by TMCC.
The loans, with an average remaining balance of $20,855, have WA seasoning of 15 months but also have remaining terms of 54 months on 69-month average original contracts. Loans over 61 months make up 70% of the pool, and 29% are from 73-84 month original terms that are traditionally excluded from transactions sponsored through TMCC's Toyota Auto Owner Trust (TAOT platform).
The lender has sponsored 44 prime-loan ABS transactions through TAOT.
The new extended-note offering will have higher initial credit enhancement levels of 6.53%, based on a $67.24 million overcollateralization on a collateral pool of receivables totaling $1.13 billion.
Recent TAOT prime issues have only need 2.75% credit enhancement to ensure triple-A senior-note ratings.
The buildup of six-plus year term loans is a result of rising prices on new cars, forcing more buyers into using extended financing terms for nearly all lenders, including for both prime and subprime borrowers. TMCC has previously kept 73-plus month loans on the books of its servicing portfolio that held $53.3 billion in loans at year’s end 2018.
The trust will limit future concentrations of loans over 72 months to 35% the extended note trust 2019-1 pool for floor credit enhancement purposes, and 37.5% for pool composition tests. For loans between 76-84 months, the buckets will be limited to 10% and 15% respectively.
Citigroup is the lead underwriter on the transaction.
