Subprime lending

Lendbuzz sells the notes as it juggles mixed performance results from 2023. Originations and revenues saw huge jumps, but so did operating expenses.

The current levels of credit enhancement are a reduction from levels of 58.0%, 48.7%, 35.9%, 22.5% and 17% on the classes A, B, C, D and E on the BLAST 2024-1 deal.

Initial overcollateralization is 11.3%, up from 8.50% of the initial collateral pool balance. Aside from that adjustment, target overcollateralization is 22.45%, compared to 13.00% on Westlake 2023-4 deal.

Issuance has been scant since DRIVE 2021-3 closed in November 2021. A lack of comparison deals from recent years makes it more difficult to forecast losses.

COVID-19 largesse enabled subprime borrowers to pay down debt and boost credit scores. Then interest rates rocketed up in 2022, and new subprime auto borrowers felt the pinch.

Classes A, B and C benefit from hard credit enhancement levels of 60.80%, 42.80% and 24.57%, respectively, an increase from the comparison deal.

Ratings analysts say the A1 through A3 tranches benefit from total hard credit enhancement of 43.00% of the deal's initial principal balance, which includes subordination and a non-declining reserve account of 1.00%.

The company is coming off of a recent period of performance improvements, with gains in net income, cash and cash equivalents.

In one of the deal's positive credit attributes, none of the underlying loans in the collateral have terms longer than 72 months. Such longer-term loans have historically performed worse than shorter-term loans.

As interest rates rise and delinquencies among borrowers with poor credit scores soar, investors are increasingly scrutinizing the riskiest slices of asset-backed securities sold by some subprime auto lenders. That's forced certain issuers to postpone deals or sweeten terms.