VStrong Auto Receivables Trust 2024-A is returning for its second 144A securitization of non-prime auto loans to raise $340 million from the capital markets.
Exeter Finance originated and services the loans, while VStrong is the Depositor, according to a pre-sale report from Moody's Investors Service. VStrong 2024-A will issue classes A through E notes from a capital structure of seven tranches. The notes have legal final maturity dates that range from April 15, 2025 through July 15, 2031, the rating analysts said.
The structure has three tranches of class A notes, and they all benefit from total initial hard credit enhancement of 38.75%. In the rest of the deal, the class B, C, D and E tranches benefit from 23.10%, 20.45%, 13.95% and 3.45%, respectively, according to the Moody's report.
The notes will be benchmarked to the three-month interpolated yield curve, the ASR deal database said, which puts pricing guidance on the notes at 22-24 basis points on the A1 notes through 110-120 bps on the A3 notes; then ranges from 150 -160 bps on the class B notes to about 525 bps on the class E notes. Those estimates are at par for the A1 notes, and at 99.99% of pricing expectations for everything else.
Exeter Finance serviced a portfolio of $9.7 billion in non-prime loans as of Dec. 31, 2023, so its experience in that role counts as a credit strength in the deal, Moody's said. Also supporting the notes' credit is the criteria for inclusion in the pool. While the loans are non-prime, Exeter originated and underwrote them following criteria from Valley Strong Credit Union, a set of requirements that Moody's said leads to auto loans with stronger credit characteristics.
The trust will repay investors sequentially, according to ratings analysts from Kroll Bond Rating Agency. Initially, the notes have benefit from overcollateralization of 2.45%, and build to a target of 10.70% of the outstanding collateral pool. Further, the notes have excess spread of 6.68%, and a cash reserve account representing 1.00% of the initial collateral pool balance.
KBRA assigns K1+ to the A1 notes; AAA to the A2 and A3 tranches; AA to the class B notes; A to the C tranche notes; BBB+ to the D tranche and BB- to the E tranche. Moody's meanwhile, assigns ratings of P-1 to the A1 notes; Aaa to the A2 and A3 notes; A3 to the C tranche; and Baa3 to the D tranche.
