Auto ABS

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.

Credit enhancement consists of overcollateralization, excess spread of about 6.09%, subordination (except for the class D and class N notes), and a reserve account.

A cash collateral account secures the principal payments, which makes SBNA's credit-linked notes deal a bit different from other bank-sponsored credit-linked note deals—albeit similar to SBCLN 2023-A.

The loans have strong borrower characteristics, such as a weighted average (WA) FICO score of 733, and WA seasoning of 10 months.

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.

The National Credit Union Administration insures Space Coast's deposits, with the power to repudiate the prime retail auto contracts or re-characterize receivables, potentially reducing or delaying note payments.

The reference pool that supports the credit-linked notes contain 97,444 fully amortizing, fixed-rate prime auto loans that have a total balance of $2.46 billion.

Classes B, C, D and E benefit from credit enhancement levels amounting to 41.35%, 28.45%, 15.30% and 6.15%, and enhancements include a reserve account, excess spread and subordination.

Expectations are for the notes to price at 18 basis points over the three-month interpolated yield curve on the A1 notes, which get 'A1+' and 'F1+' from S&P and Fitch.

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%.