20 US subprime auto ABS transactions stay on CreditWatch negative


The investment community is maintaining close observations on subprime auto financing.

S&P Global Ratings on Monday said that its ratings on 27 classes from 20 U.S. subprime auto ABS transactions will remain on CreditWatch, where they were placed with negative implications on May 12. The finance companies connected with these transactions include:

— American Credit Acceptance
— Consumer Portfolio Services
— DriveTime Automotive
— Exeter Finance
— First Investors Financial Services
— Flagship Credit Acceptance
— Global Lending Services
— Prestige Financial Services
— Sierra Auto Finance
— Westlake Financial Services

“We are continuing to assess the impact of the COVID-19 pandemic on collateral performance, including the impact of extension rates, delinquencies, recovery rates and net losses, on these transactions,” analysts said in a news release.

“The CreditWatch listings reflect the COVID-19 economic downturn, which we expect to negatively affect the performance of all auto loan originators and lead to higher cumulative net losses and reduced excess spread over the life of each transaction. As a result, the tranches placed on CreditWatch may not have sufficient enhancement to support the current ratings,” they continued.

S&P Global Ratings acknowledged a high degree of uncertainty about the evolution of the coronavirus pandemic.

“The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021,” analysts said.

“We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly,” they added.

S&P Global Ratings closed by noting that the firm expects to resolve its CreditWatch listings during the next 90 days, “focusing on each transaction’s buildup of enhancement in comparison to potentially higher expected cumulative net losses in the context of our evolving view of the severity and duration of the COVID-19 pandemic.”

Source Article