Auto ABS

Westlake Automobile Receivables Trust 2020-2 pools a portfolio of loans for mostly high-mileage used-vehicles financed by the privately held Westlake through independent and franchise dealers. The deal includes a $370.9 million triple-A tranche (as preliminarily rated by S&P Global Ratings and DBRS Morningstar) that benefits from 42.75% initial credit enhancement.

Potential COVID-19 stresses include a rising tide of unemployed borrowers missing payments and seeking extensions, as well as falling used-car values.

Global Lending Services, a subprime auto lender that has ramped down its expansion plans for 2020 amid the coronavirus outbreak, is proceeding with its second auto-loan securitization of the year.

Exeter, DriveTime and CPS last week joined a small club of subprime auto lenders sponsoring ABS deals since their TALF eligibility was announced.

The best outcome for creditors and ABS noteholders with approximately $6 billion in outstanding bonds is likely to be through a renewal of Hertz’s operations, rather than liquidation, according to analysis from the ratings agency.

The Flagship Credit Auto Trust 2020-2 transaction is only the second subprime auto-loan ABS transaction in the last two months, following the pricing last week of an American Credit Acceptance-sponsored $209.3 million bond offering.

Falling used-car values, loan forbearance programs and economic uncertainty are weighing on the lower-end of the subprime auto finance sector.

The two companies are placing two deep-subprime securitizations of consumer loan and lease contracts issued prior to the coronavirus impact on originations.

Following four prior securitizations of prime auto-loan originations through its Carvana Auto Receivables Trust (CRVNA), the firm will sponsor its first pool of non-prime retail used auto loans underwritten via its e-commerce platform.

Veros Credit received an AA rating in its 2018-1 transaction, which featured lower loan-to-value ratios and average account balances in the pool.