VW Credit, the wholly owned subsidiary of Volkswagen Group of America, is sponsoring a $1.2 billion securitization of prime auto loan receivables based on a higher percentage leases with longer terms, but also has higher weighted average (WA) FICO scores.
Fitch Ratings analysts say the deal, Volkswagen Auto Loan Enhanced Trust (VALET) 2023-1, references two potential pools of collateral, one $1.4 billion and another $1.7 billion, that are materially similar in their main collateral quality and credit enhancement characteristics.
Bank of America, Citigroup Global Markets, TD Securities, and Wells Fargo Securities are managers on the deal, which will issue mostly fixed-rate notes, according to the Asset Securitization Report's deal database. Fitch notes that BofA Securities is the lead underwriter on the deal.
The A-2-A notes will also issue fixed, but a 'B' sub-tranche could issue floating rate notes. The notes have expected final maturity dates ranging from June 20, 2024 through Jan. 22, 2023.
S&P Global Ratings, which also expects to place ratings on the notes, noted several structural and collateral changes from the previous transaction, the 2021-1. For one, the deal has a 9.25% discount rate on the yield supplement overcollateralization amount (YSOA), a, liquidity risk mitigation tool, which is significantly higher than the 4.00% from the 2021-1 transaction, the rating agency said. In another change, the initial YSOA as a percentage of the initial adjusted pool balance increased to approximately 10.46%, up from 3.26%, and initial overcollateralization decreased slightly to 3.00%, from 4.00%.
As for changes in the collateral pool, S&P noted that VALET 2023-1 has an original term to maturity of 12 to 75 months for its collateralized loans, which is slightly longer than the 12 to 72 months in previous VALET transactions. The deal will include about 3.0% of 75-month original term loans, the rating agency said.
In another change, the collateral has a weighted average (WA) FICO score of 768, a slight increase from 777. By another WA measure, the loan seasoning decreased to 9.7 months from 10.3 months.
As for the balance of vehicle manufacturers in the deal, used vehicles decreased to about 30.8% of the pool, compared with 44.4%. That is not the only element that was bumped up: Audis account for 66.5% of the pool, up from 50.0%, according to S&P. Fitch regards the increase in new vehicles, to almost 70% of the pool, as a positive credit rating driver.
Fitch expects to assign ratings of 'F1+' on the $245 million, class A-1 notes; and then 'AAA' on classes A-2-A through A-4. For its part, S&P expects to assign 'A-1+' on the class A-1 notes; and 'AAA' on the rest of the classes.
