Securitization moves by Global Lending Services, Credit Acceptance and CPS

CARY, N.C. - 

Global Lending Services, Credit Acceptance and Consumer Portfolio Services all have been active in the securitization space during the past 60 days; moves by the subprime auto finance companies that involved more than $1.1 billion in value.

The most recent move arrived this week as Kroll Bond Rating Agency (KBRA) assigned preliminary ratings to four classes of notes issued by Global Lending Services via GLS Auto Receivables Issuer Trust 2018-2, an auto loan ABS transaction.

GLS Auto Receivables Issuer Trust 2018-2 issued four classes of notes totaling $299.39 million. The notes are backed by a pledge of assets from Global Lending Services and the underlying trust, the assets will include a certificate representing the entire beneficial ownership in the underlying trust.

KBRA indicated the assets of the underlying trust will include a pool of fixed rate retail automobile contracts, made to subprime obligors, who generally have a credit bureau score ranging from 470 to 620, secured by new and used vehicles.

The agency explained the preliminary ratings reflect the initial credit enhancement levels ranging from 47.00 percent for the Class A notes to 9.50 percent for the Class D notes, which build to 58.50 percent and 21.00 percent for the Class A and Class D notes, respectively, over time.

“Credit enhancement is comprised of overcollateralization, subordination of junior note classes, a cash reserve account and excess spread,” analyst said.

This transaction represents Global Lending Services’ second term ABS securitization of the year and sixth overall. GLS’s inaugural securitization was a private, unrated term securitization that closed in 2014.

GLS is a subprime auto finance company that was founded in October 2011 and is backed by its founder Doug Duncan and BlueMountain Capital Management.

“GLS benefits from a capable management team that has extensive experience in the auto finance industry,” KBRA said.

KBRA applied its Global Auto Loan ABS methodology as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and GLS’s historical static pool data.

KBRA also conducted an operational assessment on the originator and servicer, as well as a review of the transaction’s legal structure and transaction documents. KBRA added that it will also review the operative agreements and legal opinions for the transaction prior to closing.

Preliminary Ratings Assigned: GLS Auto Receivables Issuer Trust 2018-2
Class Preliminary Rating Principal Balance
 A  AA (sf)  $176,690,000
 B  A (sf)  $52,840,000
 C  BBB (sf)  $39,590,000
 D  BB- (sf)  $30,270,000

Source: Kroll Bond Rating Agency

Credit Acceptance actions

Just before Memorial Day, Credit Acceptance announced the completion of a $450.0 million asset-backed non-recourse secured financing.

Pursuant to this transaction, the company contributed contracts having a net book value of approximately $562.6 million to a wholly-owned special purpose entity, which will transfer the contracts to a trust, which will issue three classes of notes:

Note Class Amount Average Life Price Interest Rate
 A  $281,200,000  2.58 years  99.98113%  3.47%
 B  $92,500,000  3.44 years  99.98268%  3.94%
 C  $76,300,000  3.85 years  99.98342%  4.16%

Source: Credit Acceptance                                                                                                              

Credit Acceptance explained the financing will accomplish three objectives, including:

— Have an expected annualized cost of approximately 4.0 percent including the initial purchaser’s fees and other costs.

— Revolve for 24 months after which it will amortize based upon the cash flows on the contributed contracts.

— Be used by the company to repay outstanding indebtedness.

Credit Acceptance said it will receive 6.0 percent of the cash flows related to the underlying consumer contracts to cover servicing expenses. The remaining 94.0 percent, less amounts due to dealers for payments of dealer holdback, will be used to pay principal and interest on the notes as well as the ongoing costs of the financing.

“The financing is structured so as not to affect our contractual relationships with our dealers and to preserve the dealers’ rights to future payments of dealer holdback,” Credit Acceptance said.

Developments at CPS

And about the time of the release of its first-quarter financial statement, Consumer Portfolio Services announced the closing of its second term securitization in 2018.

The transaction is CPS’ 28th senior subordinate securitization since the beginning of 2011 and the eleventh consecutive securitization to receive a triple “A” rating on the senior class of notes from at least two rating agencies. 

In the transaction, CPS highlighted qualified institutional buyers purchased $201.8 million of asset-backed notes secured by $205.0 million in automobile receivables originated by CPS. 

The sold notes, issued by CPS Auto Receivables Trust 2018-B, consist of five classes. 

Officials pointed out ratings of the notes were provided by Standard & Poor’s and Kroll Bond Rating Agency, and were based on the structure of the transaction, the historical performance of similar receivables and CPS’ experience as a servicer.

Note Class Amount  Interest Rate Average Life Price S&P Rating KBRA Rating
 A  $93.7 million  2.72%  79 years  99.99577%  AAA  AAA
 B  $33.0 million  3.23%  1.99 years  99.99587%  AA  AA
 C  $28.1 million  3.58%  2.66 years  99.98204%  A  A
 D  $24.7 million  4.26%  3.44 years  99.49656%  BBB  BBB
 E  $22.3 million  5.61%  4.12 years  99.43146%   BB-  BB-

Source: Consumer Portfolio Services                                                                              

CPS said the weighted average coupon on the notes is approximately 3.98 percent.

The company also explained the 2018-B transaction has initial credit enhancement consisting of a cash deposit equal to 1.00 percent of the original receivable pool balance and over-collateralization of 1.55 percent.

CPS added the final enhancement level requires accelerated payment of principal on the notes to reach overcollateralization of the lesser of 5.50 percent of the original receivable pool balance, or 18.50 percent of the then outstanding pool balance.

Then in a later, separate development, CPS also announced the closing of a financing backed by its residual interests in 17 previously issued securitizations.

In the transaction, the company said a qualified institutional buyer purchased $40.0 million of asset-backed notes secured by residual interests in 13 CPS securitizations issued consecutively from September 2013 through December 2016 and by an 80 percent interest in a CPS affiliate that owns the residual interests in four CPS securitizations issued in 2017. 

Officials indicated the single class of notes was rated BB (low) by DBRS and bears interest at an annual rate of 8.595 percent.

CPS explained interest will be paid on the notes monthly and principal payments will be made to the extent necessary to maintain a ratio of collateral to the outstanding notes at a specified level. 

For purposes of this financing, the company acknowledged the collateral consists of the spread account balances and the over-collateralization of the pledged securitizations. In the case of the 2017 securitizations, CPS added that only 80 percent of the spread account balances and over-collateralization are included in the collateral.