Auto ABS

Santander will provide a letter of credit, which is sized to cover up to five months of missed interest payments should the trust default on its interest obligations or fall under FDIC receivership.

The deal has a 9.25% discount rate on the yield supplement overcollateralization amount (YSOA), a, liquidity risk mitigation tool, which is significantly higher than the 4.00% from the 2021-1 transaction.

The undiscounted residual value composition is 77.54%, higher than prior GCOLT deals, such as the GCOLT 2021-1, which was 70.50%.

The National Credit Union Administration, a government-backed insurer of credit unions classifies Veridian as "well capitalized," which helps mitigate some risks associated with its lack of securitization experience.

The deal is the second one for this year, a different tack for a program that has appeared once annually in the past.

Two issuances will fund revolving pools of leases from various vehicle companies even as a looming recession may dampen travel demand.

The coming Fitch-rated deal has higher FICO scores than competitors' pools, but the auto sector faces headwinds.

HAROT 2023-2 offers notes backed by prime auto receivables, and a slightly higher concentration of credit grade-A obligors, 77.64%, up from 76.45% in HAROT 2023-1.

Of the leases securing the deal, 99.15% are open-end, while the remaining 0.85% are closed-end. This creates a potential positive because loss assumptions on the former are lower.

Prime loans comprise the collateral pool, and the deal has a more diverse loan maturity profile than previous deals.