U.S. Bank National Association is preparing to sponsor a $1 billion securitization of revenue from prime retail installment auto loan contracts, in the first ABS deal backed by prime quality auto loans that the lender has brought to market.
USB Auto Owner Trust, 2025-1, is a regulation S, 144A deal will issue notes through about seven tranches of notes, which have legal final maturity dates ranging from June 15, 2026 through Dec. 15, 2032, according to analysts at Moody's Ratings.
All the senior notes—including A1, rated P1 and A2 through A4, rated Aaa—benefit from total initial hard credit enhancement equaling 4.80% of the pool balance. Meanwhile, the class B notes (Aa3) get credit enhancement of 3.75%; and classes C (A3) and D (unrated) benefit from 2.45% and 0.25%, respectively, Moody's said.
The hard credit enhancement consists of overcollateralization, a reserve account representing 0.25% of the pool balance, and subordination—except for the class D notes.
JPMorgan Securities and US Bancorp Investments are lead bookrunners on the deal, Moody's said.
With more than $15 billion in deposits, and a 40-year-plus record of originating, acquiring or servicing motor vehicle receivables, USB is considered strong and experienced. The collateral pool is also high quality, with underlying loans that have a weighted average (WA) FICO score of 779, a loan-to-value (LTV) ratio of 97.4%, and an original term of 71.8 months.
Yet the pool has several drawbacks from a credit perspective. One is that the pool includes loans with unperfected liens, which is when the lender owns a copy of the original, signed contract but does not maintain physical possession of the original document. In such cases, USB might not have filed the UCC-1 financing statements against the dealer to reflect the transfer and assignment from the dealer to USB.
Also, receivables in USB's managed portfolio, particularly those originated after 2023 and 2024 are performing more poorly compared to previous vintages, Moody's said. That impacts the 2025-1 pool directly, because 92% of the 27,467 contracts were originated between 2023-2025.
