Moody’s Investor Service bumped up cumulative net loss expectations 1% in Exeter Finance’s most recent securitization to offset the weaker credit quality of the underlying loans.
The weighted average credit score for the $572.9 million transaction was 556, “the lowest Fico seen in recent transactions,” said Moody’s Senior Credit Officer Daniela Jayesuria of the securitization slated to close April 17.
In fact, 39% of the securitized loans had Fico scores less than 540. “We believe this pool is weaker than some of the other pools we’ve seen,” she said. As such, Moody’s expects losses in the transaction to reach 22%, up from 21% in Exeter’s Jan. 31 ABS deal.
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Already, a pair of Exeter securitizations from the latter half of 2018 are showing higher-than-normal loss rates. “2018-4 seems to perform a little bit better than 2018-3,” Jayesuria said, noting that it is “still tracking that path where we see the loss-to-liquidation [ratio] is already beyond 20%” about eight months after issuance. By comparison, one of Exeter’s 2014 transactions had a 10% loss rate eight months after issuance, the report noted.
For Exeter, the loss-to-liquidation ratio tends to stabilize over time, Jayesuria said. “Given where we see that performance coming in, we think it will stabilize at a higher level for some of these more recent transactions,” she said. “They seem to be having a weaker performance in that sense.”
Exeter filed for an initial public offering on Jan. 8, though parent company Blackstone had also reached out to potential buyers, according to a published report.
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