Prime auto ABS

Ally Bank, Capital One Auto Finance and BMW Financial Services of North America launched new note offerings, which will add to the year-to-date of $35.2 billions across 32 prior deals.

Captive finance lenders in recent years have been steadily reliant on used cars for asset-backed collateral. That’s not the case with American Honda Finance Corp.

Regional Toyota captive finance lender World Omni has its highest-ever average FICO for a securitization of prime auto-lease receivables. But it also is pooling a portfolio of contracts that have a highly concentrated mix of lease maturities.

S&P stated that as more loans stretch into 72 months or even 84 months as a result of rising new-vehicle prices, auto ABS investors must be mindful of increased credit risks that accompany extended-term loans.

The $1.11 billion Ford Credit Auto Lease Trust (FCALT) 2019-B has 20.2% of the securitization value tied to leases with terms over 36 months – up from 14.4% in FCALT 2019-A. It's the largest percentage for a Ford lease ABS deal since 2014.

For the first time, the captive-finance lender has also opted to add SOFR-based benchmark rate "fallback" plans into one of its deals, which would stand in for one-month Libor should the London interbank offered rate becomes unavailable in 2021.

A DBRS report states rising concentrations of light-duty truck collateral adds risks to vehicle securitization portfolios, but risk may differ among ABS types.

Ford Motor Credit is among the first ABS issuers to backstop the impending demise of U.S.-dollar Libor with a Fed-endorsed SOFR term rate, since a Fed working committee finalized voluntary guidance on a benchmark replacement.

Fitch says credit quality in the California-based bank's auto-loan originations have deteriorated slightly with more exposure to near-prime borrowers.

Toyota Motor Credit Corp. is debuting a new revolving ABS platform to securitize a large portion of six-plus year term loans excluded from its standard prime-loan securitization shelf.

The $1.11 billion Ally Auto Receivables Trust (AART) 2019-2 deal has three classes of senior term notes with early AAA ratings by S&P Global Ratings and Fitch Ratings.

S&P Global Ratings reports that cumulative loss levels on collateralized portfolios of subprime auto loans fell to 7.11% in March, compared to 8.67% in February. That figure was also down from 7.61% in March 2018, and the lowest since 2016.

Both transactions are the second this year for each of the automotive captive-finance firms, and will build on a tally of 19 prime auto loan ABS pools to date this year totaling $21.44 billion.

The lender has not sponsored an asset-backed transaction since 2007, according to presale reports.

Toyota Motor Credit is planning its second deal of the year, while Fifth Third is returning to the securitization market for the first time since 2017.

Recent transactions have been performing better than expected; S&P Global Ratings has set its expectations for cumulative net losses for COAT 2019-2 accordingly lower.

At 1%-1.2% of initial principal balance, the expected loss range for the $1.25 billion deal is the lowest ever for a GM Financial retail auto loan securitization.

The captive-finance lender's focus on higher-FICO borrowers since 2016 has "manifested" in ABS loss and delinquency improvements.

Approximately 68.4% of the collateral balance in Ford Credit Auto Owner Trust 2019-A derives from contracts that benefit from subsidized rates to well-qualified borrowers.

With an expected March 20 closing, BMW's next lease securitization brings first-quarter deal volume to $6.5 billion, the highest three-month total in four years.