Auto ABS

Monthly payment rates in the pool reached record highs over the last couple of years, reaching 71.5% at the end of Q1 2023, one of several credit positives to the deal.

The results offered investors some relief after a tumultuous 2022 for Carvana, which has struggled as rebounding auto production and rising interest rates have weighed on the market for used vehicles.

GMALT 2023-2 offers note holders several advantages from a credit perspective, according to Fitch, including strong residual value realizations on the cars being financed.

Underlying loans fell into higher credit tiers this time around, a result of ongoing tightening in the sponsor company's origination strategies.

The deal has a higher percentage of open bankruptcy assets, and the level of called collateral is 10.6%, which should actually slip to 8.0% of the final pool.

While spreads are widening in many cases across asset classes and credit bands, guidance is around 235 basis points over the I-Curve on the 'AAA' notes, a little tighter than 250 bps over the benchmark on the FHF 2022-2 deal.

The notes will accumulate an overcollateralization level of 11.20% of the current collateral balance and benefit from a cash reserve account equaling approximately 1.25% of the initial collateral balance.

When the deal closes, credit enhancement on the class A note will include overcollateralization, which will be 16.3% and is expected to increase to a level of 20% of the current pool balance.

Guidance on the A-1 notes is 38 to 40 basis points over the I-Curve, which is significantly wider than where the class A-1 notes from the 2023-1 deal closed.

Some 74.8% of the loans had original terms greater than 60 months, higher than 68.5% than the FAST 2020.