World Omni concentrates maturity wall in next prime auto lease ABS

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Regional Toyota captive finance lender World Omni has its highest-ever average FICO for a securitization of prime auto-lease receivables. But it also is pooling a portfolio of contracts that have an unusually concentrated mix of maturities.

The $930.14 million World Omni Automobile Lease Securitization Trust 2019-B transaction consists of 35,984 contracts with an average remaining balance of $25,849, to borrowers with a weighted average FICO of 737. The contracts average 37-month original terms, with six months of seasoning.

That is the highest FICO for any of the previous 12 World Omni securitizations since 2009.

But while benefiting from lower-risk borrower profiles in the static pool of leases, the deal also has a concentration of lease expirations taking place over the course of two quarters during the life of the transaction.

The $930.14 million World Omni 2019-B transaction is the second lease deal of the year for the regional lender for U.S. Toyota dealers in five U.S. Southeastern states.

The capital stack includes three term-note tranches with preliminary triple-A ratings from Moody’s Investors Service and Fitch Ratings: a $298.3 million Class A-2 tranche divided between fixed- and floating-rate notes maturing in July 2022; a $278 million Class A-3 tranche due November 2022; and an $81.43 million A-4 tranche due February 2025.

The trust will also issue a $40.5 million Class B subordinate tranche with an Aa2 rating from Moody’s and AA from Fitch.

A $100 million money-market tranche is also being offered, with an early P-1 Moody’s rating and F1+ from Fitch.

Moody’s considers the 2019-B pool to have higher residual value risk than World Omni’s first lease-backed deal this year. One of the factors is that the deal has a dense concentration of lease maturities within two quarterly periods - 77% of all the contracts expire in the first six months of 2022, which could expose the trust to potentially higher losses on end-lease vehicle returns should used-car values be lower than expected at that time.

World Omni has had a higher gain on vehicles returned from lease this year, averaging $1,542 per vehicle through June 30 compared to $859 in 2018.

The leases include 72% for new SUVs and trucks, with the Tacoma pickup truck representing the largest concentration at 21%.

World Omni’s managed portfolio of leases (163,772) had an outstanding balance of $4.2 billion as of June 30, up from $3.6 billion a year earlier.

Moody’s and Fitch each have an estimated 1% expected net credit loss for the deal, based on securitization value. That hasn’t changed from 2019-A, but is a higher loss rate than projected for other captive-finance auto-lease securitizations, according to Moody’s.

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