Tricolor issues $224M social ABS bond

Tricolor Auto Acceptance this month issued its second asset-backed securities (ABS) social bond, a $224 million transaction backed by loans to low-income borrowers without FICO scores. [caption id="attachment_57334329" align="alignnone" width="2560"] © Can Stock Photo / photovs [/caption] The Dallas-based lender serves thin- and no-file Hispanic consumers by leveraging machine learning and artificial intelligence . Its initial $212 million social ABS bond in May 2022 was the first of its kind in auto lending. The financier, which has been a ctive on the ABS market since July 2013, in April 2022 secured a Second Party Opinion from S&P Global Ratings on the social benefits of Tricolor’s framework and alignment with the International Capital Market Association 's social bond principles, according to S&P. Each securitization Tricolor issues is now designated as a social bond based on the lender’s platform rather than being transaction-specific, Chief Executive Daniel Chu told AFN . “Our entire platform has been rated for its ability to achieve all of the social bond principles or objectives,” he said. “Unlike most lenders who are issuing social bonds, it's embedded in our strategy.” Tricolor plans to issue $600 million to $700 million in auto ABS deals in 2023 ranging from $200 million to $300 million each, Chu said. “There are investors who value the opportunity to accomplish a purpose with their capital,” he said, adding that Tricolor’s latest deal attracted a record 19 unique investors, including five new investors. “We see the aspiration to achieve a fundamental purpose alongside with generating a financial return, which corresponds with more demand for our bonds and allows us to continue to build out our platform with more unique investors.” Growing originations Tricolor Auto continues to grow its originations and plans to expand geographically, Chu said. Tricolor’s origination volume has grown at a compounded annual growth rate of 44% for the past three years, with originations projected to reach $800 million this year, he said. Origination volume was expected to land at $750 million at yearend 2022, Chu previously said. Tricolor’s unit origination volume increased 33% in 2022 even as the used-vehicle industry declined in the low double digits. “We anticipate continued growth in 2023,” he said. Tricolor also is looking to expand its geographic footprint in areas with large density Hispanic population “where we believe our value proposition resonates,” Chu said. Tricolor currently operates in Arizona, California, Nevada, New Mexico and Texas, with plans to open in Chicago later this quarter, Chu said. Tricolor and its affiliate Ganas Auto Group operate 50 retail centers across 20 markets, according to a release. The lender has provided more than $2 billion in auto loans to underserved Hispanic consumers. Auto Finance Summit East, Auto Finance News’ new spring event, is set for May 10-12 at the JW Marriott Nashville featuring a fireside chat with Peter Muriungi, CEO of Chase Auto. Visit autofinance.live.

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