Revenue from a pool of subprime auto loans will support $1.1 billion in notes to be issued from the Westlake Automobile Receivables Trust, 2024-1.
The transaction will issue the mostly fixed-rate notes through seven tranches of classes A, B, C, D and E notes, according to ratings analysts from S&P Global Ratings. Westlake Services originated the loans, and is acting as sponsor, servicer and custodian, according to S&P. Wells Fargo Bank is acting as the bank account provider, analysts said.
The A1, A2A, A2B and A3 notes benefit from 49.70% in total initial credit support, composed of hard credit enhancement and haircut to excess spread, according to S&P. The tranches B, C, D and E notes benefit from enhancement levels of 42.49%, 33.85%, 26.07% and 21.81%, respectively, which are increases from the initial hard credit enhancement levels seen on the notes in the Westlake 2023-4 transaction. S&P puts an expected cumulative net loss of 12.50% on all classes of notes, the rating agency said.
Initial overcollateralization is 11.3%, up from 8.50% of the initial collateral pool balance, according to S&P, among some of the deal's structural changes. Aside from that adjustment, target overcollateralization is 22.45%, compared to 13.00% on Westlake 2023-4 deal, S&P analysts said.
As for collateral changes from the Westlake 2023-4 deal, the concentration of the collateral has shifted from the lender's gold program (41.33%, down from the 42.07%) to the standard program (50.67%, up from 49.93%). On a weighted average (WA) basis, the average loan-to-value ratio was 111.90%, down from 116.31%, and the assets have a non-zero credit score of 622, a slight increase from 620.
Also, the percentage of loans with an original term of 61-72 months decreased to 48.96%, from 51.32% on the Westlake 2023-4 deal.
As for other collateral characteristics, Texas, Florida and California account for the states with the top concentrations in the deal, at 17.31%, 14.20% and 14.16%, respectively. Almost all of the notes are fixed rate, except for the A2B notes, which could be floating rate. The rating agency assigns A1+ to the A1 notes; AAA to the A2 and A3 notes; AA+ to the class B notes; A+ to the class C notes; BBB to the class D notes and BB to the class E notes.
