World Omni Financial Corp. is entering the auto-loan ABS market with jumbo transaction potentially securitizing two pools of collateral that Fitch Ratings said have higher credit quality than other subprime auto-loan transactions.
Fitch noted in a recent pre-sale report that the World Omni Select Auto Trust (WOSAT) 2021-A deal will be backed primarily by subprime retail installment loans on new and used cars and light-duty trucks manufactured primarily by Toyota and originated by World Omni. The bond tranches are anticipated to total $798.42 million and $1,008.06 million, comprising the fourth WOSAT transaction, the last of which was rated by Fitch in September 2020.
MUFG Securities Americas Inc. is the structuring lead underwriter, with Mizuho Securities, TD Securities and Truist Bank acting as joint leads, according to Finsight. Fitch rates MUFG at A/F1, with a negative rating outlook.
The loan pool also contains prime loans that along with the majority subprime loans have a weighted average FICO score of 647, up from 641 in the 2020 deal, Fitch says. The rating agency notes that 78-month loans increased to approximately 20% in the current deal, up from 15% in the last one, and while these loans have limited performance data because of a lack of seasoning, they have a strong weighted-average FICO of 759.
“Overall, the credit quality of this pool is stronger than that of other Fitch-rated subprime auto loan transactions, including prior WOSAT Transactions,” Fitch says in the Sept. 7 report. “The performance of 2021-A is expected to be stronger with lower losses when compared to prior WOSAT transactions as a result of the pool’s improved credit quality.”
Initial hard-credit enhancement, while comparable, is expected to be lower than recently issued Fitch-rated subprime auto-loan transactions, including prior WOSAT transactions. Fitch noted, however, that “the levels of loss coverage remain adequate over Fitch’s loss proxy for the expected ratings.”
The transaction has no exposure to Libor because both the assets and liabilities are fixed rate.
