Westlake Financial Services is on track to double its issuance volume of single-B rated bonds, with a second $113 million tranche slated for securitization by yearend, Chief Financial Officer Paul Kerwin told Auto Finance News.
The tranche will be part of a $1 billion securitization — Westlake’s third this year. Despite the lower credit quality of this asset class, investor demand is high, which bolsters Westlake’s potential profits and provides an opportunity for the company to increase volume of lower-yielding prime loans, Kerwin said.
Although single-B bonds will be “at risk for downgrade” if even a mild deterioration in economic conditions occurs, the risky securitizations are becoming more popular as a looming contraction period has investors hungry for higher yields, Amy Martin, primary credit analyst with S&P Global Ratings, told AFN.
So far this year, four lenders have combined to securitize $141 million worth of single-B-rated pools. Of the total, Westlake accounted for $113.4 million, with American Credit Acceptance, First Investors Financial Services Corp., and United Auto Credit combining for the rest. By comparison, no single-B tranches were securitized last year. Westlake plans to use the funds to support its growth as a full-spectrum lender.
