First Investors Financial Service and Credit Acceptance are marketing a total of $519 million of securities backeed by subprime auto loans. It is each issuer's first deal of 2014.
The $220 million First Investors Auto 2014-1 will issue three senior tranches and three subordinate tranches that will be rated by Standard & Poor’s. Wells Fargo is the lead underwriter on the deal.
S&P expects to assign AAA’ ratings to the class A-2 and A-3 notes; the A-1 money market fund notes will be rated A-1+’. The class B notes will be rated AA’, the class C notes will be rated A’ and the class D notes will be rated BBB’.
S&P said in its presale report that 84.8% of the pool is comprised of long-term loans (those with an original term of 61-72 months). The weighted average annual percentage rate (APR) for the pool is 14.42%.
First Investors is an independent consumer finance company that purchases dealer-originated auto loans from the sale of new and used vehicles (indirect auto loans) and makes auto loans directly to consumers to refinance an existing auto loan (direct auto loans).
S&P said that approximately 40% of the pool is comprised of loans originated under the direct program.
The $299 million Credit Acceptance Auto Loan Trust 2014-1, will offer class A notes that will be rated AAA’ by S&P and class B notes that will be rated AA’. S&P will not rate the class C notes.
Wells Fargo BMO Capital Markets and Fifth Third Securities are named as the initial purchasers of the notes.
Credit Acceptance targets auto dealerships throughout the U.S. that write installment sales contracts for the deep subprime auto market. The company has two lending programs: the portfolio and loan purchase programs. The portfolio program currently makes up approximately 94% of new originations.
Under the program, Credit Acceptance lends directly to dealers in its network. These dvances are made in connection with the dealers' origination of installment sales contracts that obligors enter into to purchase vehicles on the dealers' lots.
The installment sales contract cash flows are used to repay the dealer advances.
The 2014-1 deal is backed by a pool of loans to dealers secured by automobile installment sales contracts (dealer advances) and non-recourse automobile installment sales contracts (purchased loans), according to the presale report.
The pool consists of 1,788 dealer advances from 1,627 dealers. The highest dealer concentration in pool is approximately 0.64% and the top 10 dealers account for approximately 5.11% of the securitized dealer loans.