Kroll Bond Rating Agency (KBRA) announces an update to the November 4, 2013 preliminary ratings on four classes of First Investors Auto Owner Trust 2013-3 (FIAOT 2013-3), an auto loan ABS transaction. The deal priced on November 6, 2013 with lower coupons than estimated which resulted in additional enhancement in terms of excess spread in the transaction. As a result, the Class B and Class D notes will be preliminary assigned AA+ and BBB+ ratings respectively.
FIAOT 2013-3 is collateralized by approximately $250 million (upsized from $206.4 million) of subprime auto loan receivables. The preliminary ratings reflect the initial credit enhancement levels of 19.20% for the Class A notes, 14.60% for the Class B notes, 6.30% for the Class C notes and 1.50% for the Class D notes. Credit enhancement consists of overcollateralization, subordination of junior notes, cash reserves and excess spread. This transaction is First Investors’ third securitization of 2013 and its twelfth securitization overall.
First Investors is an experienced and capable originator and servicer of subprime auto loans. The company was founded over 25 years ago and has benefitted from a stable and experienced management team, which has managed its business through several economic cycles. In October 2012, First Investors was acquired by a company controlled by Aquiline Capital Partners LLC, a private equity firm that invests in the financial services sector. First Investors’ loan portfolio has performed well over the past several years in part due to its strong credit culture, tighter underwriting standards as well as stabilizing unemployment levels and a strong used car market.
KBRA applied its U.S. Auto Loan ABS methodology as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and First Investors’ historical static pool data. KBRA also conducted an operational assessment on the originator and servicer, as well as a review of the transaction’s legal structure and transaction documents. KBRA will also review the operative agreements and legal opinions for the transaction prior to closing.