Flagship Credit Acceptance LLC (FCA) is preparing an asset-backed securitization worth $350 million in a transaction set to close on May 5. The notes are backed by subprime auto loan receivables, according to a presale report from Standard & Poor’s Ratings Services.
The loans in the Flagship Credit Auto Trust 2016-2 (FCAT 2016-2’s) have a weighted average Fico of 588, a weighted average seasoning of less than one month, and a weighted average original term of 71 months, according to the report.
FCA reported a 37% year-over-year growth in its managed portfolio to $2.87 billion as of March 31, 2016, and delinquencies were 5.4%, up from 4.8% at the same time a year prior. “Though this is an improvement over the 8% for year-end 2015, it is still an increase on a year-over-year basis,” Standard & Poor’s said in the report. “Higher delinquencies and losses were driven by the increasing weighted average seasoning of the overall portfolio.”
This is the fourth securitization for FCA since it merged with CarFinance Capital LLC in January 2015. CarFinance has since “retired” as an indirect auto finance provider, according to a February presale report from Kroll Bond Ratings Agency. Flagship became the company’s indirect brand in January 2016.
FCAT 2016-2 is Flagship’s 15th transaction in four years, according to Standard & Poor’s. The transaction shows significant credit enhancement and structural changes from its previous transaction, FCAT 2016-1. CarFinance indirect loans decreased to 1.78% from 17.75%, and direct loans decreased to 14.71% from 15.45%.
Approximately 15% of FCA’s monthly originations are generated direct to consumer through CarFinance, according to the report, and direct loans have historically performed better than indirect loans. “The collateral characteristics in this pool [FCAT 2016-2] are slightly weaker versus the series 2016-1 pool, and we continue to observe deterioration in performance on a managed portfolio basis,” Standard & Poor’s said. However, “the 2016-2 pool has a stronger distribution, with a much lower percentage of the pool from the CarFinance indirect channel, which historically is a higher loss channel.”
The Chadds Ford, Pa.-based lender currently has 845 employees and originates auto loans in 46 states through 9,400 dealerships.
Learn more about the tech and disruption in the industry at Auto Finance Innovation 2016, May 11 in Fort Worth, Texas, and visit www.autofinanceinnovation.com. To learn more about the Auto Finance Risk & Compliance Summit, visit www.afrcs.com.
