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Toyota lenders adding $2B-$2.7B in loan and lease deals to ABS pipeline

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It’s a Toyotathon in the asset-backed securitization market.

In the same week Toyota Motor Credit Co. launched a $1.25 billion (potentially upsized to $1.75 billion) transaction backed by a pool of new- and used-vehicle loans it underwrote for Toyota U.S. dealers, a regional captive finance arm – World Omni Finance Corp. – is planning to sell bonds against a portfolio of new-car auto leases issued through Toyota dealers in the Southeast U.S.

World Omni’s transaction will be either $766.5 million or $962.91 million, pending a decision to measure market interest for a potentially upsized deal.

Toyota Motor Credit

Toyota Motor Credit’s first auto-loan pool of the year, Toyota Auto Receivables 2020-A Owner Trust, is the 48th ABS transaction it has sponsored.

The capital stack includes four classes of term senior notes with provisional triple-A ratings from Moody’s Investors Service and S&P Global Ratings: the Class A-1 tranche that will be set at $315 million or $441 million, due May 2021; the Class A-2 tranche of $445 million or $622 million in notes, due November 2022; the Class A-3 tranche of $363.7 or $508.2 million in notes, due May 2024; and the Class A-4 tranche sized at $95 million or $135 million, due May 2025.

The Class B notes totaling either $31.3 million or $43.8 million have preliminary Aa2 (Moody’s)/AA (S&P) ratings.

Moody’s has estimated cumulative net losses of 0.6% of the deal, similar to the previous Toyota securitization it rated. S&P’s loss range is 0.55%-0.65%.

The proposed collateral pool will be either a $1.325 million loan-balance offering of 69,725 loans, or a $1.856 billion pool of 97,464 loans. Both have similar credit attributes: a weighted average FICO of 766, average APR of 3.2%, and an average seasoning of 16 months. Eighty percent of the loans are for new vehicles, with SUVs (42%) making up the largest model segment in the collateral. The average loan size is just over $19,000.

S&P noted in its report the percentage of extended-term loans (61-72 months) decreased slightly to 54.04% (in the smaller pool) from 54.33%. The weighted average LTV decreased to 97.79% from 98.37%, and the WA APR was up to 3.19% from 2.98%.

Approximately 21% of the loans by balance have original terms exceeding 61 months (with no loans underwritten past 72 months).

MUFG Securities is the lead underwriter.

Toyota Motor Credit’s retail loan portfolio stood at $56.5 billion as of Dec. 31, and the total number of contracts outstanding was 3.16 million. TMCC’s portfolio delinquency rate was 2.32% in 2019, with net losses of 0.55%.

World Omni

In a deal led by Bank of America Securities, regional Toyota finance company World Omni – a wholly owned subsidiary of JM Family Enterprises – will market four senior-note classes and a subordinate tranche in its first auto-lease backed transaction of the year.

World Omni plans a Class A-2 note offering of $245 million, or $306 million if upsized; a $235 million or $296 million Class A-3 tranche; and a $71.61 million or $90.18 million Class A-4 notes proposal. All of the term notes have preliminary triple-A ratings from Moody’s and Fitch Ratings.

A one-year money-market tranche will also be issued, totaling either $75 million or $95 million, with preliminary triple-A ratings.

The senior notes are supported by 18.75% credit enhancement.

The pool will consist of either 29,474 or 36,944 contracts, each pool with a weighted average FICO of 741, original terms averaging 36 months and seasoning of four months. Over 19% of the vehicle lease value are tied to Toyota Tacoma pickup trucks.

At year’s end, World Omni held $4.47 billion in outstanding lease contracts as of Dec. 31. Total delinquencies stood at 1.06% and net credit losses of 0.25%, according to presale report.

World Omni has had an average gain of 11.7% on vehicles returned, as a percentage of Automotive Leasing Guide pricing, an improvement from 8.2% in 2018.

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