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Volkswagen Prices $1B of Auto Loan ABS

Volkswagen priced $1.0 billion of securities backed by auto loans, according to a regulatory filing.

Volkswagen Auto Loan Enhanced Trust (VALET) 2014-2 issued four classes of notes. The $199 million money market tranche with a weighted average life of 0.3 years yields 0.20%.

There are also three classes rated ‘AAA’/’AAA’ by Standard & Poor’s and Fitch Ratings: a $325 million tranche with weighted average life of 1.05 years yields 22 basis points over the Eurodollar synthetic forward curve; a $369 million tranche with a weighted average life of 2.35 years yields 24 basis points over interpolated swaps, and a $107 million tranche with a weighted average life of 3.53 years yields swaps plus 28 basis points.

Citigroup is lead manager on the deal.

By comparison, the 2.42-year tranche of Volkswagen’s previous auto loan securitization, completed in April, priced at 19 basis points over swaps and the 3.52-year notes priced at 23 basis points over swaps.

The pool of collateral backing the latest deal features more longer-term loans and weaker borrowers, according to Fitch. The loans have a weighted average FICO score of 762, in line with the issuer’s prior securitization. However the percentage of borrowers with FICO scores that are still prime, but have FICO scores below 700, has risen, to 19.1%. That compares with just 17.72% in the previous transaction.

Among other risk factors, Fitch noted that the latest transaction has increased the percentage of extended-term loans, at 57.44% of the pool. That is up from 55.31% in the 2014-1 transaction and is higher than for all previous VALET transactions, except 2013-2. 

Despite the slight deterioration in the collateral, the notes are structured with initial credit enhancement at 3.10%, similar to Volkswagen’s previous deals.    

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