Kroll Bond Rating Agency is on track to issue its first-ever auto securitization downgrade, as losses mount for subprime lender Honor Finance.

KBRA put the 2016 securitization — Honor Finance’s inaugural transaction — on “watch downgrade” last week. Honor Finance’s losses “rose considerably over the past few months,” higher than initial expectation for the $8.86 million Class C tranche, KBRA Senior Director William Carson told Auto Finance News. Continued management turnover also contributed to the warning, the ratings agency said.

Transactions can be on “watch” for 90 days, but KBRA can make changes anytime before that “if we see things deteriorate further,” Carson said. “As we saw in this deal, the performance did change negative fairly quickly,” he added.

Cumulative net losses in the transaction are at 17.63% — 5.98% higher than expected. Based on collateral mix at closing and historical performance data, KBRA had expected losses to climb as  high as 21.9%. Yet recent analysis has put losses on pace to hit the 27%-to-29% range.

Honor Finance will likely be on issuers’ and investors’ watchlists, Joe Cioffi, chair of the insolvency, creditors’ rights, and financial products practice group at Davis & Gilbert, told AFN. “It could become a bellwether of sorts, ultimately becoming a testament to the ability of credit enhancement to hold off the tide of losses before they reach investors,” he said.

Since warning Honor Finance of the downgrade in December 2017, the Evanston, Ill.-based company’s senior-most executives — President and Chief Executive James Collins, Chief Operating Officer Rob DiMeo, and Chief Financial Officer Lionel Lenz — have left the company.