Westlake Services is preparing to issue $185.2 million in auto asset-backed securities in its first prime auto loan ABS, raising funds from a pool of fixed-rate retail installment sale contracts. Westlake Auto Receivables Trust, 2023-P1 will be its inaugural deal of that collateral type.
The transaction will issue notes through five classes, and repay investors through a senior-subordinate structure, according to an S&P Global Ratings pre-sale report. Westlake Services originated the loans, and is co-sponsor, servicer, and custodian on the deal, according to S&P analysts.
J.P. Morgan Securities, the deal's co-sponsor and retaining sponsor, will also be lead underwriter on the transaction, with Wells Fargo as the bank account provider, according to S&P.
Westlake Services' prime auto originations are from the same channels as the company's core business, which is made up of a mix of franchised and independent dealerships, according to S&P. The 2023-P1 collateral pool, which finances new and used auto purchases, has a weighted (WA) average credit bureau score of 736, WA seasoning of 24 months, and a WA loan-to-value ratio of 111.31%.
Westlake has consistently originated prime auto loan collateral since 2006, and it is a growing portion of the company's business.
WLAKE 2023-P1, has several structural features to shore up the notes' credit prospects, including initial credit enhancements of 12.11%, 9.70%, 7.25%, and 4.40%, for classes A, B, C and D, respectively.
Classes A, B, and C also have subordination, at 7.71%, 5.30% and 2.85%. The notes include overcollateralization of 3.90% of the initial collateral pool balance and will increase to a target of 4.45% of the initial collateral pool balance.
Peer comparisions
Since this is Westlake Services' first sponsored transaction of prime auto receivables, it did compare WLAKE 2023-P1 with peer transactions that it has rated. On a WA basis the WLAKE 2023-P1 collateral has seasoning of about 24.43 months, compared with 6.24 months on the CarMax 2023-3 and 2.11 months on the Carvana 2023-P2. WLAKE's credit bureau score is 736, compared with 717 on CarMax and 704 on Carvana.
As for original loan terms, 47.38% of WLAKE's collateral pool has an original term of 61-72 months, while that level comes to 58.08% on the CarMax pool, and 63.15% on the Carvana collateral.
S&P expects to assign ratings of 'A-1+' to the class A-1 notes; 'AAA' to the A-2 notes; 'AA' to the class B notes; then 'A' to the class C notes; and 'BBB' to the class D notes.
