The outlook for World Omni Auto Receivables Trust, 2019-C should hinge in part on the capabilities of World Omni in the role of originator, underwriter and servicer. So it is probably a boon to the deal that Fitch Ratings says it believes that the company is capable in all those roles.
In addition, most aspects of the WOART 2019-C demonstrate a strong credit profile and Fitch noted that the primary concern for a compromised deal would be a weakness as the servicer. WOART 2019-C has mitigated that risk by arranging for servicing transferability, credit enhancements and cash flow stress tests to maintain credit in the notes and evade serious issues with repayment.
WOART, 2019-C, is slated to issue $862 million in notes backed by loans on new and used automobiles and light trucks. Toyota Motor Corp. is the sole manufacturer of the vehicles collateralizing the loans, which World Omni Corp. originated, according to a Fitch presale report.
This deal’s collateral pool has a weighted-average FICO score of 753. The deal’s percentage of extended-term loans at 82.3% remains elevated compared with previous deals completed in 2019.
Because of improved credit quality in the lower classes of World Omni Auto Receivables Trust, 2019-C, Fitch says it expects those notes to perform better than lower classes of previous deals, especially prior to 2017-B. Fitch came up with a forward-looking credit loss expectation of 1.45%.
Another attractive element of the deal, from a credit perspective, is credit enhancement on the payment structure. Classes A, B, And C have initial hard credit enhancement that totals 5%, 2% and 0.50%.
The deal benefits from subordination, with class A notes benefiting from subordination of class B and class C notes, totaling 4.50%, and the class B notes benefiting from subordination of class C notes totaling 1.50%. Payments to WOART 2019-C are fully sequential, so credit support provided to classes A through the subordination classes of B and C is expected to grow as the transaction amortizes.
Among the deal’s many positive aspects, WOART 2019-C benefits from initial excess spread of about 3.18% a year, a slight increase from 2.09% in the WOART 2019-B deal. Fitch noted that WOART-2019-C has a weighted average life of 1.78 years, so excess spread is expected to be 5.68%.
The expected ratings, from Fitch, are ‘F1+’ on class A-1; ‘AAA’ on class A-2a/b, ‘AAA’ on class A-3; ‘AAA’ on class A-4; ‘AA’ on class B; and ‘A’ on class C.
