Westlake Leads in Subprime ABS Volume With Third Securitization

Westlake Financial Services is one of the main drivers of new auto asset-backed securitization volume in the subprime space following its third securitization of 2018, Brian Ford, the chartered financial analyst of structured finance research at Kroll Bond Rating Agency, told Auto Finance News.

The latest $1 billion deal pushes Westlake’s total volume to around $3 billion this year, compared with approximately $1.5 billion through two deals in 2017, according to presale reports by S&P Global Ratings and Kroll Bond Rating Agency.

The single-b rated class F tranche — the lowest tranche in the rating reports — is a part of the deal at $45.2 million, totaling the single-b rated bond investment to around $158.5 million. Westlake previously told AFN that it intends to continue its issuance of single-b rated bonds with “similar amounts,” Chief Financial Officer, Paul Kerwin, said. The two previous issuances had about $56.5 million worth of single-b rated bonds in both deals.

In terms of the riskiness of the single-b rated bond, Westlake is confident in its consistency to perform at or below rating agency expectations, Kerwin said. “There’s no hesitation in issuing single-b bonds,” he said. “[Investors] look at where that bond is in terms of the capital structure and then determine if the yield is appropriate for the corresponding risk.”

Thanks to the “strides” Westlake has made in improving their servicing, the lender is able to serve as one of the two big drivers in year over year increases in Kroll Bond’s latest auto indices report, Rosemary Kelley, senior managing director and head of the consumer ABS group for Kroll Bond, told AFN.

Ally Financial’s near-prime shelf served as the second main driver in year over year increases auto ABS issuance volume, according to Kroll Bond.

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