In Veros Credit's first asset-backed securities (ABS) issuance of 2024, Veros Auto Receivables Trust will sell $252.4 million in bonds to investors secured by motor vehicle retail installment sale contracts extended to non-prime borrowers.
The non-prime portfolio registered a slightly better FICO score than previous transactions from the program going back to 2020-1, at 603, but so was the annual percentage rates (APR) of 22.7%, according to analysts at Moody's Ratings.
The transaction comes off several positive operational trends at Veros, according to Kroll Bond Rating Agency, including a larger expanded geographical footprint and increased originations, which peaked at $315.9 million in 2023, representing a 6.0% increase. The collateral pool also consists of loans on luxury vehicles, which represent 5.4% of the pool, an increase from 4.0% from the level seen in VEROS 2023-1.
As of the deal's cutoff date, the luxury vehicles had an average balance of $227,457, compared with $17,681 for all the loans in the pool. Also, the luxury vehicles had a weighted average (WA) annual percentage rate of 15.9%, compared with 22.7% across the entire pool; and a WA loan-to-value ratio of 82.0%, compared with 117.7% on the overall pool.
Total initial hard credit enhancement ranges from 45.7% on the class A notes to 14.6% on the class D. Meanwhile all the notes benefit from a reserve fund representing 1.50% of the outstanding pool. The A, B, C and D notes have legal final maturities that range from Nov. 15, 2027 through May 15, 2031.
Underlying contracts had an average remaining balance of $17,681, with an original term of 61 months on a weighted average (WA) basis, with 54 months in remaining terms. In terms of original loan term distribution, the 61- 72-month range accounted for the largest band, at 37%, the rating agency said.
Capital One Securities and Deutsche Bank Securities are managers on the deal, according to Asset Securities Report's deal database. Notes from the deal, slated to close before the end of the week, are expected to range from a yield of 6.3% on the AA- notes to 10.0% on the BB notes.
Almost the entire portfolio, 97%, is comprised of used cars, according to Moody's.
To the A, B, C and D tranches, KBRA assigns AA-, A-, BBB and BB, respectively. Moody's assigns Aa2, A1 and Baa2 to the A, B and C tranches, respectively.
