Westlake Services, a Los Angeles-based company that acquires and services retail installment contracts that meet a range of credit criteria, is sponsoring a $1.3 billion securitization of those contracts.
Collateral for the deal, Westlake Automobile Receivables Trust, 2026-1, is composed of fixed-rate subprime, near prime and prime contracts that finance new and used vehicles, according to Kroll Bond Rating Agency.
The transaction will issue notes to investors through eight tranches of class A, B, C, D and E notes, and use a portion of the notes to repay warehouse facilities and fund future loan originations, KBRA said.
The most senior tranche, class A1, will issue the bulk of the notes, $318,000. KBRA assigns a K1+ rating to the tranche, which will have a legal final maturity date of Jan. 15, 2027, the rating agency said. Almost all the notes will pay a fixed rate coupon, except the A2B tranche, which will be benchmarked to the Secured Overnight Financing Rate (SOFR), the rating agency said.
Otherwise, the legal final maturity dates on WLAKE 2026-1 range from Sept. 15, 2028 on the A2A notes to March 15, 2033 on the class E notes.
While Westlake's customer base usually have credit bureau scores ranging from 500 to 700, the WLAKE 2026-1 collateral pool's non-zero bureau score was 620 on a weighted average (WA) basis.
Initial credit enhancement levels include 40.85% on the four class A notes; 33.55% on the class B notes; 22.55% on the class C notes; 13.20% on the class D notes and 8.35% on the class E notes, KBRA said.
The deal's capital structure includes a sequential pay structure giving priority to the A, then B, C, D and E notes. Within the class A notes, payments will be made to the A1 noteholders first, followed by pro rata payments to classes A2A and A2B, then A3 once the A2 notes are fully pid off, KBRA said.
Initial overcollateralization is 7.35%, which will build to a target of 15.70% of the outstanding balance. The deal also includes a non-declining cash reserve account equal to 1.00% of the initial pool balance, KBRA said. Also, WLAKE 2026-1 includes excess spread of about 9.82%, the rating agency said.
KBRA assigns AAA to the A2 through A4 notes; AA to the class B notes; A to the class C notes and BBB to the class D notes.
