TFS to add second revolving securitization

MIAMI — Toyota Financial Services is gearing up to issue a second revolving retail asset-backed securitization, Director of Secured Funding Adam Stam told Auto Finance News. The revolving program, which debuted this year, should reach $2.5 billion in outstanding prime auto loans by 2020, he added.

TFS issued the first transaction in its inaugural Toyota Auto Loan Extended Note Trust (TALNT) shelf — a $1.5 billion deal — on June 5, according to a presale report by S&P Global Ratings. But rather than pay off as the loans amortize, this shelf revolves, Stam noted. “We are always adding new collateral to this one to keep the balance the same,” he explained. “It’s non-amortizing and pays down in five years.” 

The point of the revolving ABS program is to “stack up” receivables, adding assets every year for a period of five years.

The transaction is also the first time TFS has securitized longer-term receivables, Stam said. The pool includes prime auto loan receivables with terms up to 84 months, however, the captive limited those loans to 10% of the securitized pool, in a bid to keep investors at ease. 

“Investors aren’t used to seeing those longer-term loans yet,” Stam said. “But we think [the shelf] is a great way to securitize some of the longer-term loans in a revolving loan program where it’s going to be outstanding for a longer period of time.” 

TFS’s triple-A rating keeps investors appeased despite the longer-term loans on the ABS program, Stam said. “It’s about having the same display in underwriting as we currently work with,” he said. “We do 620 FICO score for anything that goes into our ABS deals — it’s very low risk.”

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