First Help Financial sponsoring a securitization of motor vehicle retail contracts, aiming to raise $153 million in the capital markets and pay principal sequentially, increasing the percentage improvement in assets as the pool amortizes and deleverages.
The transaction, First Help Financial Trust 2022-1, FHFT 2022-1, is First Help Financial’s fourth transaction and is a 144a transaction, according to Moody’s Investors Service, which is the first time to assign ratings to an FHF Trust transaction. Auto loans on new and used light trucks, minivans and sport utility vehicles secure the ratings.
Some 47.4% of the underlying pool was extended to consumers with no credit score or borrowers with a weighted average (WA) FICO score of 665. Collateral assets have a loan-to-value ratio of 104%. Moody’s has acknowledged that these borrower attributes — including the fact that FHF is a small, niche auto lender with less than $500 million in assets, adds variability to expected loss scenarios — are credit issues. for the notes.
Rating agency plans to assign ‘A2’ ratings to $126.9 million Class A notes; ‘A3’ at $14.1 million Class B tickets and ‘Baa3’ at $8.3 million Class tickets.
Credit support on the Notes begins with a minimum initial credit enhancement of 18.0%, 8.8% and 3.0% on Classes A, B and C respectively. While Moody’s thought FHF was not strong as a repairer, due to its relatively small size and lack of experience, it views Vervent’s role as a backup repairer as a credit strength.
From an ESG perspective, Moody’s noted that the short duration of FHF Trust’s transaction, 2022-1, mitigates environmental and social risks. From an environmental point of view, the short duration is not likely to have a significant impact on the credit quality of the bonds. Socially speaking, the geographical diversity of the obligors of the guarantee and the short duration of the operation should protect the notes against the risk of significant losses.
What also works in favor of the agreement is its duration, according to Moody’s. The bonds have a legal final maturity between January 2028 and June 2028.
Other forms of credit enhancement include overcollateralization, which will be 2% of the initial pool balance. This should reach a target OC level equal to 5.5% of the current pool balance or a non-decreasing 0.5% of the initial pool balance, whichever is greater.