Tesla Inc. is slated to issue its second-ever U.S. auto securitization on Dec. 19, according to presale reports.
The $837 million transaction is 53% larger than Tesla’s inaugural securitization, which was issued in February. That securitization was subsequently downgraded because of a “significant shortfall” in the Model 3 production rate and a weak financial situation, according to Moody’s Investor Service.
The latest securitization consists of 12,435 prime auto lease contracts originated by Tesla Finance LLC with an average Fico score of 791 and maximum lease term of 36 months, according to Moody’s.
By comparison, the most recent auto lease ABS pools securitized by BMW and Mercedes had weighted average Fico scores of 789 and 784, respectively. Additionally, Tesla’s pool characteristics are stronger than other recent lease pools securitized by Ford, Nissan, and Hyundai, according to Moody’s.
“Higher credit-quality obligors have a lower tendency to default on their monthly lease payments, leading to lower credit losses for the transaction,” Moody’s noted in the Tesla presale report.
Risk factors for the latest securitization include Tesla’s short operating history, limited residual value performance exacerbated by Tesla’s tight control of the resale channel, and a collateral pool backed by only two battery electric vehicle models, according to Moody’s. Tesla’s Model S sedan accounts for 57% of the ABS pool, while the Model X SUV makes up 43%.
Moreover, the deal comes at the end of a rough year for the electric OEM. In September, Chief Executive Elon Musk settled with the SEC after being sued for misleading investors with tweets on Aug. 7 saying he was considering taking Tesla private and had secured funding.
