Westlake Services is sponsoring a $1.4 billion securitization of revenue from a pool of subprime auto loans, selling the primarily fixed-rate notes through the Westlake Automobile Receivables Trust 2026-2 transaction.
The Rule 144A transaction comes to market with initial hard credit enhancement levels of 33.60%, 22.90%, 13.50% and 8.65% across the subordinate tranches B, C, D, and E, respectively, according to S&P Global Ratings and Morningstar DBRS.
These were higher than the levels seen on the Westlake 2026-1 transaction, according to S&P, but for class A the credit enhancement levels were unchanged from the previous deal, at 40.85%.
S&P found that initial overcollateralization was 7.65%, an increase from 7.35% seen on the 2026-1 series, while the target overcollateralization level is 13.00% of the current pool balance, plus 1.00% of the initial collateral balance.
The notes also benefit from a non-declining and fully reserve account funded to equal 1.00% of the initial pool balance at closing.
Eight tranches of notes will be offered to investors, closing on May 13, according to DBRS. Legal final maturity dates on the A1, A2 and A3 tranches are April 15, 2027, June 15, 2029 and April 15, 2030, respectively.
As for the subordinate notes, classes B, C and D have the same legal final date, March 15, 2032. The most subordinate tranche, the class E notes, matures finally on Aug. 15, 2033, the rating agencies said.
DBRS says its cumulative net loss assumption for Westlake 2026-2 is 11.75%, based on the pool composition.
Westlake Services originates loans through independent and franchise dealers, and as of March 2026, the two channels accounted for 64% and 36% of business, respectively.
Loans originated through the independent dealers generally have shorter maturities, lower loan-to value (LTV) ratios, and the associated vehicles have higher mileage. Yet, DBRS notes, recent loan vintages through its franchise dealers have seen slightly more losses.
DBRS assigns ratings to the notes ranging from (P) R-1 (high) on the A1 notes to (P) BB (sf) on the class E notes. S&P assigns ratings of A-1+ to the A1 notes; AAA to the A2 and A3 notes; AA to the class B notes; A to class C; and BBB and BB to classes D and E.
