Tricolor Auto Securitization is coming to the market for a fourth time with $223.9 million in auto asset-backed securities.
Although loan originator Tricolor Auto Group focuses on underserved customers who cannot obtain traditional financing, typically, this collateral pool has only a miniscule amount of loans to borrowers with limited qualifications.
Tricolor Auto Receivables is sponsoring the transaction, which has a mid-February closing date. Barclays Capital and J.P. Morgan Securities are acting as managers on the deal, according to the Asset Securitization Report deal database.
KBRA says that for the current securitization, TAST 2023-1, the collateral pool includes 0.6% of loans (as a portion of the deal's principal balance) extended to customers who:
· have no FICO score, or a FICO score 650 or lower
· fall short of an 'A+' or 'A' credit grade or
· took out a loan with an original term of 66 months
Also since the 2022-1 transaction, Tricolor Auto Group increased is dealership operations to 53, up from 47. Similarly, originations were $582 million for through September 2022. That represents a 39% increase for the first nine months of 2021 and a 140% increase compared to the first nine months of 2020, according to the rating agency.
The auto lender focuses on the underserved Latino market, typically serving customers who are unable to secure financing from traditional lending sources such as banks, credit unions and captive auto finance companies, according to a pre-sale report from Kroll Bond Rating Agency. In December 2022, Tricolor Auto Group decreased the maximum original term of loans it extended to more marginally qualified borrowers, from 72 months to 66 months, the rating agency said.
TAST 2023-1 also features loans with an average current loan balance of $24,323, compared with $21,600 for the 2022-1 deal, the rating agency said. While the lender had tightened the types of loans that marginally qualified borrowers can get, some 80.7% of loans in the collateral pool was underwritten to borrowers with no FICO score, up from 69.2% in the TAST 2022-1 deal.
Kroll expects to assign ratings ranging from 'AAA' to the $138.9 million, class A certificates to 'B+' on the $14.4 million, class F certificates. Legal final maturities range from Aug. 17, 2026 on the class A notes to June 17, 2030 on the class F notes.
