American Car Center securitized $283 million of nonprime auto leases, its second transaction of the year and third overall.
Moody’s Investors Service expects 31% of cumulative net losses for the pool, up from 30% in ACC’s February securitization. The weighted average Fico for the securitization was 527, compared with 529 in ACC’s previous securitization. Original loan terms were up to 47.7 months versus 47.2, while seasoning fell to 3.1 months as compared with 3.8 months. “The longer lease term and shorter seasoning could potentially lead to higher credit loss,” the rating agency wrote in a presale report.
Among the strengths of the securitization are low residual value exposure and a buildup of credit enhancement as the pool amortizes, according to Moody’s. On the other hand, the securitization is challenged by the fact that ACC is a small, unrated servicer, collateral quality is weak, and used-vehicle prices face a risk of decline.
Moody’s also highlighted that 80% of the obligors in the transaction reside in Alabama, Florida, Georgia and Tennessee. “This regional concentration is among the highest in typical auto loan and lease transactions and exposes the transaction to worsening performance stemming from regional economic trends,” according to the report.
Memphis, Tenn.-based ACC, backed by private investment fund York Capital, finances leases to consumers at its 58 dealerships in eight Southeast states. ACC had a $578.3 million portfolio as of Sept. 30, up 61.1% year over year, according to Moody’s. Total delinquencies increased 122 basis points to 5.49% through September, and net losses grew 32 basis points to 8.76%.