Subprime lending

While DBRS maintained a rating of AA for the Lendmark Financial's first ABS of 2018, S&P issued an A rating after estimating higher net losses on the underlying subprime accounts.

RAC King (d/b/a American Car Center) has expanded rapidly since being acquired in a 2016 leveraged buyout; now it's bundling most of its portfolio into collateral for bonds.

The $185 million transaction features a higher exposure to borrowers entering bankruptcy than the sponsor's 2016 deal; it's also more seasoned, since it recycles 2014 collateral.

Higher LTVs and fewer low-risk, new-car loans trumped the recent decline in managed-portfolio delinquencies and improved ABS performance since 2015.

The subprime auto lender failed to disclose that it received fees for referring borrowers to CarMax, the used-car dealer, according to California's financial regulator.

But GMF's deeper dive into long-term loans for a pool increasingly dominated by pricier trucks and SUVs caused a slight bump in expected ABS credit losses.

The performance of outstanding transactions issued via the Capital Auto Receivables Trust platform is weakening, so rating agencies are demanding additional investor protections.

Credit enhancement on the senior notes has risen to 36.25% from 28.7% to account for higher expected losses on the collateral; Kroll's base-case range is for 6.75% to 8.75% over the life of the deal.

DriveTime's improving loss performance in recent securitizations allowed it to relax the enhancement levels on its first securitization of the year.

Despite riskier terms, rising delinquencies and falling used car values, investors keep buying bonds backed by prime and subprime auto loans and leases.