Auto ABS

Driven Brands is preparing a $175 million asset-backed securities deal that will provide investors with exposure to a relatively safe industry during the coronavirus pandemic.

Subprime auto ABS market participants do not see its outlook worsening significantly as a result of the pandemic, but most anticipate losses.

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.

Credit unions have seized share in auto lending. It may not be long before the same happens in auto ABS.

According to presale reports on Flagship’s $355 million auto-loan securitization, the subprime auto lender is removing the 2% collateral pool limit on loans over six years (72 months) that can be added during a three-month prefunding period for Flagship Auto Credit Trust 2020-1.

The lease deal – Santander’s sixth ABS of Chrysler Capital leases since 2017 – has a higher proportion of leases with original terms longer than 36 months (44.5%) than prior deals through the platform.

Toyota Motor Credit Co. is sponsoring a $1.25 billion loan-backed transaction (potentially upsized to $1.75 billion), while regional Toyota captive finance lender World Omni Finance Corp. is sponsoring an auto-lease deal at either $766.5 million or $962.9 million.

The Justice Department had issued subpoenas in 2014 and 2015 to GLS and other subprime lenders regarding underwriting criteria for lending as well as representations and warranties for loans being securitized, according to Kroll.

Mercedes-Benz, Nissan and Ford will market up to $3.86 billion in new prime auto-lease securitizations, adding to a pipeline that opened up with Hyundai's deal last week.

The older loans have boosted the $260M CPS 2020-A pool seasoning to nine months, compared to CPS’ standard vintage of loans under one month that usually collateralize CPS ABS platform issues.

GMF’s $1.269.9 billion asset-backed transaction will be secured by a pool of loans that has a slightly lower weighted average FICO, higher collective LTV and longer average terms compared to prior deals issued via GMF’s securitization platform.