Flagship Scores ‘AAA’ on Latest Securitization

  • Larissa Padden
  • August 2, 2016

Pipeline WaveFlagship Credit Acceptance issued its third securitization for the year — backed by $400 million of subprime auto loans — this time with top notes receiving a AAA rating, according to S&P Global. Previously, the highest S&P had rated Flagship’s top notes was AA, the agency said in a presale report released Friday.

Among other strengths S&P took into account, Flagship completed the integration of two business platforms — its namesake platform with CarFinance Capital — without disruption to servicing and while maintaining consistent performance on the Flagship Credit Auto Trust (FCAT) indirect portfolio.

Flagship has also completed 15 securitizations (10 under the Flagship name and five under CarFinance), the oldest of which has reached a 12% pool factor — meaning that 12% of the original principal has yet to be repaid — and is performing better than its initial expectations, S&P said in the report.

“Taken as a whole, we believe the strengths noted above outweigh the concerns at this time and, in our assessment, we can now assign a rating as high as ‘AAA’ to FCAT transactions, where we had previously capped them at ‘AA’,” S&P said.

Loans in the 2016-3 trust have a weighted average Fico of 597, a weighted average original term of 70.6 months, and weighted average LTV of 119.1% — all relatively unchanged from the previous trust.

As of June 30, the managed portfolio grew 40% year over year, to $3.01 billion, while delinquencies fell to 7.54%, from 8.01% at yearend 2015. By comparison, though, delinquencies were 6.84% at midyear 2014. Annualized net losses through June were 4.29%, up from 3.64% in the year prior. “As per management, the higher delinquencies and losses were driven by the increasing weighted average seasoning of the overall portfolio and deterioration in CarFinance indirect originations, which the company has ceased originating as of the end of January,” S&P said.

At midyear, Flagship and CarFinance had 858 employees and originated auto loans in 49 states through 9,700 mostly franchise dealerships.

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