United Auto Credit and Consumer Portfolio Services are planning to issue a combined total of $501 million of securities backed by subprime auto loans.

CPS plans to sell $340 million bonds via its deal called CPS Auto Receivables Trust 2016-A that is being rated by Standard & Poor’s and DBRS. Citigroup and Credit Suisse are joint bookrunners on the deal.

The transaction pool has a weighted average loan-to-value (LTV) ratio of approximately 115.3%, slightly above the WA LTV of 115.2% of the sponsor’s previous deal. 

The overall credit quality of the pool, as measured by CPS’ internal credit scoring, has also declined. The percentage of loans originated in CPS' top four credit tiers (Preferred, Super Alpha, Alpha Plus, and Alpha) decreased to 78.0% from 81.0%. The percentage of loans originated under CPS' lower credit tiers (Standard, Delta, and First-Time Buyer) increased to 22.0% from 19.0%.

The trust will offer ‘AAA’ rated senior notes that are due October 15, 2019 that benefit from 47.75% credit support. At the subordinate level the trust will offer $42.5 million of ‘AA-’ rated notes due 202;0 $51.8 million of ‘A-‘ rated notes due 2021; $36.5 million of ‘BBB’ rated notes due 2021; $20.9 million of ‘BB-‘ rated notes due 2021; and $10.5 million of ‘B’ rated notes due 2023.

The credit quality of the loans backing United Auto Credit Corp’s latest deal are by some measures higher than its previous deal. Like the previous deal, nearly all of the loans (99.7%) finance the purchase of used cars.. However the 2016-1 pool has a weighted average LTV of 110.47% lower than the WA LTV of 120.17% from UACC’s 2015-1 transaction. Borrowers are also on average higher rated with a WA FICO of 561 relative to a score of 552 in the previous deal.

United Auto Credit Securitization Trust 2016-1 will offer $73.1 million of note rated ‘AAA’ by DBRS hat benefit from 61.08% credit support.  

Also on offer are $24.3 million of ‘AA’ rated notes; $24.2 million of ‘A’ rated notes; $24.3 million of ‘BBB’ rated notes and $15.6 million of ‘BB’ rated notes. 

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