In its tenth securitization of revenue from auto retail installment loans, Tricolor Auto Securitization Trust is setting out to raise $331.2 million in asset-backed notes.
Known as TAST 2023-2, the deal will repay investors from payments on a pool of non-prime retail auto contracts, according to ratings analysts at Moody's Investors Service. In this deal the collateral pool has a slightly lower weighted average (WA) FICO score of 589, whereas the same score on the TAST 2023-1 was 613, Moody's said. The assets had a lower loan-to-value (LTV) ratio of 126%, compared with 131% on the previous deal.
TAST 2023-2 will issue notes through six classes of notes, which have legal final maturity dates that range from Aug. 16, 2027 on the class A notes through May 15, 2030 on the class F notes. They benefit from a reserve fund of 1.50%, Moody's said. The rating agency also noted that classes A, B, C, D, E, and F have total minimum initial hard credit enhancements of 50.65%, 46.5%, 41.7%, 35.8%, 28.7% and 23.2%, respectively, Moody's said.
Other benefits to the notes include overcollateralization, subordination and excess spread, the rating agency said.
Barclays Capital and J.P.Morgan Securities are lead underwriters on the deal, Moody's said, while Vervent will serve as backup servicer to the notes. Tricolor Auto Group, Tricolor California Auto Group and Flexi Compras originated the underlying auto contracts, the rating agency said. The pool consists of 10,418 obligors, 81.2% of which have no credit score and all of which are buying used cars. On a weighted average (WA) basis, the loans have an original term of 64 months, with 61 months remaining.
The notes benefit from several credit boosters. At closing credit enhancement to the class A notes will be 21.70% of the initial pool balance, plus the pre-funding amount, and could build to 24.30% or greater, depending on certain conditions, Moody's said.
Several drawbacks exist, though, including that Tricolor is the servicer. With $965 million in assets as of June 30, it is considered small. It is a financially weak servicer one at that, according to Moody's. Vervent is the backup servicer, though, which does offset some of that risk.
Moody's assigned ratings of 'A1' to the class A and class B notes; 'A2' to the class C notes; 'Baa1' to the class D notes; 'Ba2' to the class E notes and 'B2' to the class F notes.
