China’s asset-backed securities market is a growing funding source for auto lenders, as issuance has topped $4.5 billion (RMB31.2 billion) this year, according to data from S&P Global Ratings’ China Securitization Performance Watch report.
“We expect improving debt serviceability, enhanced underwriting and risk control, and securitization’s structural protection to continue to support the robust performance of auto loan ABS transactions in 2019,” S&P noted.
Genius Auto Finance, a joint venture between Geely Automobile and BNP Paribas Personal Finance, is the latest deal to hit the market, according to a pre-sale report from Moody’s Investors Service released today. The $610.5 million (RMB4.2 billion) deal marks the Shanghai-based auto lender’s second securitization this year, bumping up its total volume to $1.04 billion (RMB7.2 billion) in 2019. The collateral pool consists of 86,361 contracts secured by new Geely, Volvo and Lynk & Co. branded cars. Genius Auto Finance’s portfolio totaled $3 billion (RMB20.9 billion) as of March 31.
The portfolio’s static structure serves as a key strength of the transaction, Moody’s noted. In other words, no further loans can be added to the transaction after its closing date, which is slated for July 23. As a result, the deal is only exposed to the default risk of the loans in the closing pool, which has a weighted average remaining term of 26.5 months.
However, Genius Auto Finance’s short operating history is a concern for the rating agency. The lender was established in 2015 by majority shareholder Geely Auto, which owns 80% of its shares. BNP Paribas Personal Finance holds the remaining 20% of shares.
