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Presale:
Prestige Auto Receivables Trust 2020-1October 8, 2020
Preliminary Ratings
Class Preliminary rating Type Interest ratePreliminary amount
(mil.
$)(i)Legal finalmaturity
A-1 A-1+ (sf) Senior Fixed 50.500 Oct. 15, 2021
A-2 AAA (sf) Senior Fixed 154.520 Feb. 15, 2024
B AA (sf) Subordinate Fixed 47.380 Oct. 15, 2024
C A (sf) Subordinate Fixed 60.480 Nov. 16, 2026
D BBB (sf) Subordinate Fixed 28.220 Nov 16, 2026
E BB- (sf) Subordinate Fixed 35.890 Feb. 15, 2028
Note: This presale report is based on information as of Oct. 8,
2020. The ratings shown are preliminary. Subsequent information may
result inthe assignment of final ratings that differ from the
preliminary ratings. Accordingly, the preliminary ratings should
not be construed asevidence of final ratings. This report does not
constitute a recommendation to buy, hold, or sell securities.
(i)The actual size of these trancheswill be determined on the
pricing date.
Profile
Expected closing date Oct. 22, 2020.
Collateral Subprime auto loan receivables.
Issuer Prestige Auto Receivables Trust 2020-1.
Contributor, sponsor, servicer, andcustodian
Prestige Financial Services Inc., a Utah corporation.
Depositor Prestige Receivables Corp. II, a special-purpose
corporation established underthe laws of Delaware.
Indenture trustee and backup servicer Citibank N.A.
(A+/Stable/A-1).
Owner trustee Wells Fargo Delaware Trust Co. N.A.
Structuring lead manager Wells Fargo Securities LLC.
Presale:
Prestige Auto Receivables Trust 2020-1October 8, 2020
PRIMARY CREDIT ANALYST
Zarif Ahmed
New York
(1) 212-438-6690
[email protected]
SECONDARY CONTACT
Kenneth D Martens
New York
(1) 212-438-7327
[email protected]
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2529740
mailto: [email protected]:
[email protected]: [email protected]:
[email protected]
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Credit Enhancement Summary
Prestige Auto Receivables Trust
2020-1 2019-1 2018-1 2017-1 2016-2 2016-1 2015-1
Preliminary rating
Class A AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf)
AAA (sf)
Class B AA (sf) AA (sf) AA (sf) AA (sf) AA (sf) AA (sf) AA
(sf)
Class C A (sf) A (sf) A (sf) A (sf) A (sf) A (sf) A (sf)
Class D BBB (sf) BBB (sf) BBB (sf) BBB (sf) BBB (sf) BBB (sf)
BBB (sf)
Class E BB- (sf) BB (sf) BB (sf) BB (sf) BB (sf) BB (sf) BB
(sf)
Subordination (% of the initial receivables)
AAA 42.65 34.95 35.75 34.10 34.50 30.70 28.50
AA 30.90 24.50 26.75 24.10 25.50 22.90 21.50
A 15.90 12.50 14.00 11.80 12.50 11.40 11.00
BBB 8.90 2.65 4.25 3.15 2.25 3.60 2.00
BB N/A N/A N/A N/A N/A N/A N/A
Overcollateralization
Initial (% of theinitialreceivables)
6.50 6.75 6.75 6.50 7.00 4.50 3.50
Target (% of thecurrentreceivables)
18.50 +2.00% (ii)
15.60 14.50 12.90 13.10 13.15 8.50
Floor (% of theinitial andprefundedreceivables)
2.00 2.00 2.00 2.00 2.00 2.00 1.50
Reserve account
Initial (% of theinitialreceivables)
1.00 1.00 1.00 1.00 1.00 1.00 1.00
Target (% of thecurrentreceivables)
1.00 1.00 1.00 1.00 1.00 1.00 1.00
Floor (% of theinitial andprefundedreceivables)
1.00 1.00 1.00 1.00 1.00 1.00 1.00
Total initial hard credit enhancement (% of the initial
receivables)
Class A 50.15 42.70 43.50 41.60 42.50 36.20 33.00
Class B 38.40 32.25 34.50 31.60 33.50 28.40 26.00
Class C 23.40 20.25 21.75 19.30 20.50 16.90 15.50
Class D 16.40 10.40 12.00 10.65 10.25 9.10 6.50
Class E 7.50 7.75 7.75 7.50 8.00 5.50 4.50
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Presale: Prestige Auto Receivables Trust 2020-1
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Credit Enhancement Summary (cont.)
Prestige Auto Receivables Trust
2020-1 2019-1 2018-1 2017-1 2016-2 2016-1 2015-1
Excess spread peryear (%)(estimated)(i)
13.69 13.31 12.04 12.70 12.82 11.66 13.30
Original expectedloss range (%)
18.25-19.25 13.25-14.00 13.00-13.75 13.00-13.75 13.00-13.75
12.25-12.75 11.25-11.75
Revised expectedloss range (%)
N/A 18.75-19.75 15.25-16.00 13.75-14.25 16.70-17.00 16.70-17.10
14.00-14.50
(i)The excess spread calculations are based on a servicing fee
of 2.75%. (ii)18.50% of current pool balance plus 2.00% of initial
pool balance.N/A--Not applicable.
Rationale
The preliminary ratings assigned to Prestige Auto Receivables
Trust 2020-1's (PART 2020-1)$376.99 million automobile
receivables-backed notes series 2020-1 reflect our view of:
- The availability of approximately 55.42%, 48.32%, 38.79%,
33.81%, and 26.08% of creditsupport for the class A, B, C, D, and E
notes, respectively (based on stressed cash-flowscenarios,
including excess spread), which provide coverage of more than
2.90x, 2.50x, 1.95x,1.65x, and 1.33x our 18.25%-19.25% expected
cumulative net loss range for the class A, B, C, D,and E notes,
respectively. These credit support levels are commensurate with the
assignedpreliminary 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)' and
'BB- (sf)' ratings on the class A, B, C, D, andE notes (for more
information, see the S&P Global Ratings' Expected Loss and Cash
FlowModeling sections below).
- Our expectation that under a moderate ('BBB') stress scenario,
all else being equal, ourpreliminary ratings are consistent with
the credit stability limits specified by section A.4 of theAppendix
contained in our article, "S&P Global Ratings Definitions,"
published Aug. 7, 2020.
- The credit enhancement in the form of subordination,
overcollateralization, a reserve account,and excess spread (for
more information, see the Credit Enhancement Summary table
above).
- The timely interest and ultimate principal payments made under
the stressed cash flowmodeling scenarios, which are consistent with
the assigned preliminary ratings.
- The collateral characteristics of the securitized pool of
subprime auto loans.
- Prestige Financial Services Inc.'s (Prestige's) securitization
performance history since 2001.
- The transaction's payment and legal structures.
S&P Global Ratings acknowledges a high degree of uncertainty
about the evolution of thecoronavirus pandemic. The current
consensus among health experts is that COVID-19 will remaina threat
until a vaccine or effective treatment becomes widely available,
which could be aroundmid-2021. We are using this assumption in
assessing the economic and credit implicationsassociated with the
pandemic (see our research here: www.spglobal.com/ratings). As
thesituation evolves, we will update our assumptions and estimates
accordingly.
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Presale: Prestige Auto Receivables Trust 2020-1
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Transaction Overview
The PART 2020-1 issuance is Prestige's first securitization in
2020. The series 2019-1 transactionclosed in July 2019. The series
2020-1 transaction is structured as a true sale of the receivables
toPrestige Receivables Corp. II (PRC II) from Prestige, the
originator. By way of a further true sale,PRC II will sell the
assets it acquires to the trust, a bankruptcy-remote
special-purpose entity. Thetrust will then pledge its interest in
the receivables to the indenture trustee on the noteholders'behalf
(see chart 1).
Chart 1
We expect principal and interest payments on the PART 2020-1
notes to begin on Nov. 16, 2020,and subsequent payments to be made
on the 15th day or the following business day of eachmonth. The
class A, B, C, D, and E notes will each be paid a fixed interest
rate and receive principalsequentially, as described in the
Transaction Structure section below.
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2529740
Presale: Prestige Auto Receivables Trust 2020-1
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In rating this transaction, S&P Global Ratings will review
the relevant legal matters and opinionsoutlined in its
criteria.
Changes From The PART 2019-1 Transaction
The prefunding period for series 2020-1 has increased slightly
to four months, compared withthree months for series 2019-1. The
credit enhancement summary table shows a comparison ofthe proposed
PART 2020-1 credit enhancement to prior PART transactions. The
significant creditenhancement changes from the series 2019-1
transaction include the following:
- Hard credit enhancement increased by 745 basis points (bps),
615 bps, 315 bps, and 600 bpsfor classes A, B, C, and D,
respectively; for class E, it decreased by 25 bps.
- The target overcollateralization increased to 18.50% of the
current pool balance and 2.00% ofthe initial pool balance from
15.60% of the current pool balance previously.
The increased initial hard credit enhancement is primarily
because of increased subordinationoffset by a slight decrease in
initial overcollateralization. The collateral characteristics are
slightlybetter with a greater percentage of Chapter 7 and Chapter
13 bankruptcy collateral (increased to44.21% from 31.80%).
Prestige's static pool data indicate that bankruptcy collateral
typicallyexhibits lower losses than non-bankruptcy collateral;
therefore, we view this change as a positivefrom a credit
perspective, and we reflected it in our loss expectation.
We considered the transaction's overall collateral pool mix; the
performances of Prestige'sorigination static pools,
securitizations, and managed portfolio; peer comparisons; and
aforward-looking view of the economy given the measures taken to
contain the COVID-19pandemic. As a result, our expected cumulative
net loss range for this transaction is18.25%-19.25% (see the
S&P Global Ratings' Expected Loss section).
The deal is subject to a prefunding period ending on Jan. 31,
2021, and any collateral prefundedduring that time is subject to
certain eligibility parameters. The series 2020-1 parameters,
whichapply to the aggregate pool including the prefunded
receivables, compared with those of series2019-1 are as
follows:
- A weighted average original term of no greater than 70.6
months, which is slightly higher thanthe series 2019-1 parameter of
70.0 months;
- An aggregate amount of bankruptcy collateral of at least
44.50% of the aggregate principalbalance of the pool, an increase
from 29.00%;
- A non-zero weighted average obligor credit score (as of the
time the related receivables wereoriginated) of at least 533,
increased from 532 for the series 2019-1;
- A weighted average original loan amount as a percentage of the
wholesale value of the financedvehicle of no more than 133%, which
matches the series 2019-1 parameter;
- A weighted average loan payment as a percentage of the
obligor's income will be no more than10.50%, which is slightly
higher than the 10.02% for the series 2019-1; and
- A weighted average annual percentage rate (APR) of no less
than 18.40%, which is down from19.20%.
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Presale: Prestige Auto Receivables Trust 2020-1
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Transaction Structure
The PART 2020-1 transaction incorporates the following
structural features:
- A sequential payment structure in which the subordinate note
classes will providenonamortizing credit enhancement to the senior
classes;
- A prefunding account that will be funded with approximately
$80.6 million from the sale of thenotes; this amount is
approximately 20% of the total collateral balance. The prefunding
periodends on Jan. 31, 2021.
- An initial 6.50% overcollateralization amount that will build
to a target of 18.50% of the currentpool balance plus 2.00% of the
initial pool balance by applying excess spread, subject to a
floorof 2.00% of the initial and prefunded pool balance;
- A reserve account that will be funded with an initial deposit
of 1.00% of the initial pool balanceand a deposit of 1.00% of
subsequent receivables as of the related cutoff dates during
theprefunding period. The reserve account will be nondeclining
throughout the transaction's life;and
- A mechanism for paying principal to ensure that the senior
notes do not exceed the collateralbalance before paying subordinate
interest.
Payment Structure
Distributions will be made from the available funds according to
a specific priority (see table 1).
Table 1
Payment Waterfall
Priority Payment
1 The indenture trustee and owner trustee fees, and to the owner
trustee, the indenture trustee, and the backupservicer, any
reasonable indemnities and out-of-pocket expenses (including,
without limitation, attorneys' feesand expenses and any conversion
fees), provided, however, that such expenses, excluding conversion
fees, will belimited to $150,000 and conversion fees will be
limited to $30,000.
2 To the servicer, the 2.75% servicing fee and expenses,
including the conversion fees of any successor servicerother than
the backup servicer, to reimburse the servicer for any unreimbursed
servicer advances, and to pay thecustodian expenses permitted under
the custodian agreement.
3 Class A note interest.
4 Principal to the extent necessary to reduce the class A note
principal balance to the pool balance.
5 The remaining principal balance, paid sequentially, of any
outstanding class A notes on their respective finalscheduled
distribution date.
6 Class B note interest.
7 Principal to the extent necessary to reduce the combined class
A and B note principal balance to the pool balance.
8 The remaining principal balance of any outstanding class B
notes on their final scheduled distribution date.
9 Class C note interest.
10 Principal to the extent necessary to reduce the combined
class A, B, and C note principal balance to the poolbalance.
11 The remaining principal balance of any outstanding class C
notes on their final scheduled distribution date.
12 Class D note interest.
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Presale: Prestige Auto Receivables Trust 2020-1
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Table 1
Payment Waterfall (cont.)
Priority Payment
13 Principal to the extent necessary to reduce the combined
class A, B, C, and D note principal balance to the poolbalance.
14 The remaining principal balance of any outstanding class D
notes on their final scheduled distribution date.
15 Class E note interest.
16 Principal to the extent necessary to reduce the combined
class A, B, C, D, and E note principal balance to the
poolbalance.
17 The remaining principal balance of any outstanding class E
notes on their final scheduled distribution date.
18 To the reserve account, the amount necessary to reach the
required level.
19 To the noteholders, the regular principal distributable
amount.
20 To the owner trustee, indenture trustee, and backup servicer,
any fees and expenses due that are in excess of therelated cap on
each.
21 To any successor servicer, the additional servicing
compensation, if applicable.
22 Any remaining amounts to the certificateholder.
The above payment priorities may change if a credit event of
default (namely, a failure to payinterest on the controlling note
class, a failure to pay principal at final maturity, or the
trust'sbankruptcy) or a non-credit event of default (namely, a
material breach of a representation,warranty, or covenant) occurs
and persists.
The indenture trustee may accelerate the notes and will do so if
directed in writing by noteholdersholding a majority of the
outstanding amount of the controlling note class. The trust estate
mayalso be liquidated, but only if a credit event of default
occurs, if noteholders holding a majority ofthe outstanding amount
of the controlling note class consent, and one of the following
occurs:
- The sale or liquidation proceeds are sufficient to ensure all
noteholders are paid in full;
- All noteholders consent to the sale; or
- The indenture trustee determines that the trust estate will
not provide sufficient funds to paythe noteholders in full on an
ongoing basis and obtains the consent to the sale from two-thirdsof
the principal amount of the outstanding notes.
If the notes are accelerated following a non-credit event of
default, then distributions will be madefrom the available funds
according to the payment priority shown in table 1. However, there
will beno cap on expenses and indemnities in item 1 of the
waterfall, and payment of the regularprincipal distributable amount
in item 19 will include all available funds until the total
notebalance has been reduced to zero.
If the notes are accelerated following a credit event of
default, or if the trust estate is soldfollowing the exercise of
remedies after a credit event of default, then distributions will
be madefrom the available funds according to the following payment
priority (see table 2).
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Presale: Prestige Auto Receivables Trust 2020-1
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Table 2
Credit Event Of Default Payment Waterfall
Priority Payment
1 To the trustees, any trustee fees and expenses as well as any
expenses owed to the backupservicer without cap.
2 To the servicer, any servicing fee and expenses as well as any
expenses owed to the custodian.
3 Class A note interest pari passu among the class A-1 and A-2
notes.
4 To class A-1 noteholders, principal until class A-1 is paid in
full.
5 To class A-2 principal until class A-2 is paid in full.
6 Class B note interest.
7 To class B noteholders, principal until class B is paid in
full.
8 Class C note interest.
9 To class C noteholders, principal until class C is paid in
full.
10 Class D note interest.
11 To class D noteholders, principal until class D is paid in
full.
12 Class E note interest.
13 To class E noteholders, principal until class E is paid in
full.
14 To any successor servicer, the additional servicing
compensation, if applicable.
15 Any remaining amounts to the certificateholder.
Securitization Performance/Surveillance
Prestige issued six bond-insured securitizations from 2001-2007,
all of which have paid off. Fivesenior-sub transactions--series
2009-1, 2011-1, 2012-1, 2013-1, 2014-1, and 2015-1--have alsopaid
off.
According to our calculations, the paid-off cumulative net
losses for the 2001-2015 pools rangefrom 5.88% for the series
2004-1 pool to 15.82% for the series 2007-1 pool (see chart 2).
Theseries 2007-1 pool experienced the highest cumulative net
losses, which we attribute to not onlythe effects of the recession,
but also the pool's low percentage of bankruptcy collateral
(13.1%)compared with the other paid-off pools.
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Presale: Prestige Auto Receivables Trust 2020-1
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Chart 2 Chart 3
Prestige currently has five outstanding securitizations: series
2016-1, 2016-2, 2017-1, 2018-1,and 2019-1. All outstanding pools
are performing worse than our initial expectations.
Table 3
Performance Data For Outstanding Prestige Auto Receivables Trust
Transactions
Transaction/series Month
Poolfactor
(%) CNL (%)60-plus-day
delinquency (%)Initial lifetime CNL
% projectionRevised expected
lifetime CNL(i)
2016-1 54 10.77 16.45 3.23 12.25-12.75 16.70-17.10
2016-2 47 18.21 15.11 2.80 13.00-13.75 16.70-17.00
2017-1 37 26.86 11.00 2.48 13.00-13.75 13.75-14.25
2018-1 24 46.83 7.60 2.11 13.00-13.75 15.25-16.00
2019-1 14 68.16 4.23 1.56 13.25-14.00 18.75-19.75(ii)
(i)Expected lifetime CNLs for series 2016-1, 2016-2, 2017-1, and
2018-1 were revised in February 2020. (ii)Expected lifetime CNL for
series2019-1 was revised in September 2020. CNL--Cumulative net
loss. N/A--Not applicable.
For more information, see "Six Prestige Auto Receivables Trust
2019-1 Ratings Affirmed; Class ERemoved From CreditWatch Negative,"
published Sept. 23, 2020, and "Twelve Prestige AutoReceivables
Trust Ratings Raised, Four Affirmed On Four Transactions,"
published Feb. 28, 2020.
Managed Portfolio
As of June 30, 2020, Prestige's serviced portfolio was
approximately $1,038.0 million, a 8.30%decrease since June 30,
2019. Total delinquencies decreased to 3.50% of the outstanding
loanbalance as of June 30, 2020, from 5.40% as of June 30, 2019.
Net losses on the other handincreased to 7.18% (annualized) as of
June 30, 2020, compared with 6.00% (annualized) as ofJune 30, 2019.
Portfolio size had been steadily increasing up until 2018. However,
due to recent
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Presale: Prestige Auto Receivables Trust 2020-1
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credit tightening measures, there has been a reduction in
origination amounts.
Table 4
Managed Portfolio
As of June 30 As of Dec. 31
2020 2019 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010
2009
Delinquency experience
Portfolio atend of period(mil. $)
1,038.0 1,131.9 1,127.2 1,105.7 1,083.3 1,094.4 940.7 863.0
728.6 544.0 422.7 416.2 494.7
30-plus-daydelinquenciesas a % of theportfolio
3.5 5.4 6.5 5.6 5.5 5.4 4.6 4.3 3.4 3.2 3.9 5.8 6.2
For the periodended June 30 For the period ended Dec. 31
2020 2019 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010
2009
Loan loss experience
Avg.month-endamountoutstandingduring theperiod (mil. $)
1,081.2 1,116.8 1,124.9 1,076.1 1,101.8 1,015.2 892.2 800.3
636.7 470.0 412.5 449.5 561.8
Netcharge-offsas a % of theavg.month-endamountoutstanding
7.2 6.0 7.1 6.5 6.1 4.9 4.4 3.3 2.0 1.9 3.8 5.9 6.6
Static pool performance by segment
The static cumulative net losses by annual vintage on the
company's managed portfolio are shownbelow on an aggregate basis
(see charts 4 and 5), as well as broken out by bankruptcy
andnon-bankruptcy collateral (see charts 6 and 7).
Prestige looks for obligors whose credit history displays a
period of good credit followed by aperiod of poor credit, which may
include a recent bankruptcy, but who now demonstrate eitherpositive
payment behaviors or strong potential to establish such behaviors.
The individuals whomPrestige typically finances under its
bankruptcy program have generally suffered a life event, suchas
medical issues, a layoff, overextension, or a divorce, that caused
a temporary financial setbackleading to the bankruptcy filing. In
our view, Prestige's bankruptcy collateral tends to performbetter
than its non-bankruptcy collateral because obligors generally
emerge from the U.S.Bankruptcy Code process in the case of Chapter
7 with all or most debts discharged, or in the caseof Chapter 13
with a plan to repay creditors over a period of usually three to
five years. Theobligor's credit score will, however, have suffered
significantly as a result of the bankruptcy, andtherefore credit
will be harder and more expensive to obtain. An additional
consideration is that anobligor cannot receive a second discharge
in any Chapter 7 bankruptcy petition that is filed withineight
years from the date that the first Chapter 7 petition was filed.
For Chapter 13 bankruptcy, an
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Presale: Prestige Auto Receivables Trust 2020-1
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obligor is not eligible for a discharge if a previous discharge
was received under Chapter 7 withinthe prior four-year period, or,
if the prior discharge was received under Chapter 13, within the
priortwo-year period. As a result, the obligor is usually eager to
re-establish creditworthiness bydemonstrating good payment
behaviors going forward.
Chart 4 Chart 5
Chart 6 Chart 7
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Presale: Prestige Auto Receivables Trust 2020-1
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Pool Analysis
As of the initial cutoff date on Sept. 30, 2020, the collateral
pool consisted of approximately$322.55 million in auto loans.
Collateral up to a value of approximately $80.64 million can
beadded during the prefunding period, which will end on Jan. 31,
2021. As mentioned in the ChangesFrom The PART 2019-1 Transaction
section above, the final aggregate pool, comprising theprefunded
collateral and the statistical pool, must comply with certain
eligibility requirements,which we account for in our expected
loss.
Table 5
Collateral Comparison
Prestige AutoReceivables
Trust Prestige Auto Receivables Trust
2020-1(i) 2019-1(i) 2018-1 2017-1 2016-2 2016-1 2015-1
2014-1
Receivables balance(mil. $)
322.6 313.4 437.3 358.5 369.5 326.8 414.5 396.4
No. of receivables 18,507 16,491 26,743 23,383 22,350 18,736
24,537 23,461
Avg. original loanbalance ($)
17,429 19,504 18,522 17,440 16,531 17,883 18,900 17,971
Weighted avg. PTI (%) 10.3 9.9 10.1 10.4 11.0 11.0 10.8 10.9
Weighted avg. APR(%)
18.5 19.3 18.8 18.6 18.5 18.3 18.3 18.7
Weighted avg.original term (mos.)
70 70 70 70 70 70 70 70
Weighted avg.remaining term(mos.)
61 66 64 64 66 67 65 65
Weighted avg.seasoning (mos.)
9 4 6 6 4 4 5 5
Original term greaterthan 60 mos. (%)
94.2 91.9 92.1 92.6 93.4 92.9 91.0 90.0
Weighted avg. LTV (%) 132.0 132.3 132.4 133.2 133.0 132.7 131.4
131.4
% of new vehicles 11.6 10.8 10.1 8.1 8.6 7.1 8.1 7.8
% of used vehicles 88.4 89.2 89.9 91.9 91.4 92.7 91.9 92.2
Bankruptcyreceivables (%)
44.2 30.2 38.3 47.8 41.7 47.3 50.7 41.4
Vehicle type breakout (%)
Car 54.6 61.1 66.1 72.0 74.6 75.7 76.1 74.1
SUV 34.8 28.1 25.6 22.4 20.0 18.8 18.2 19.2
Van/truck 10.6 10.8 8.3 5.7 5.4 5.5 5.7 6.7
Top three state concentrations (%)
IL=9.4 IL=7.7 IL=7.9 IL=9.1 IL=8.9 IL=10.3 IL=10.5 TX=12.0
OH=7.8 TX=7.0 OH=7.6 AZ=9.0 TX=7.9 TX=7.8 TX=10.4 IL=9.3
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Table 5
Collateral Comparison (cont.)
Prestige AutoReceivables
Trust Prestige Auto Receivables Trust
2020-1(i) 2019-1(i) 2018-1 2017-1 2016-2 2016-1 2015-1
2014-1
IN=7.4 OH=7.0 AZ=6.6 OH=7.0 AZ=7.5 OH=7.2 OH=8.3 OH=7.2
(i)As of the initial cutoff date on June 30, 2019, for series
2019-1 and Sept. 30, 2020, for series 2020-1. All other pool cuts
include prefunding,except series 2016-1. PTI--Payment to income.
APR--Annual percentage rate. LTV--Loan-to-value. N/A--Not
applicable.
S&P Global Ratings' Expected Loss: 18.25-19.25%
To derive the base-case loss for the series 2020-1 transaction,
we reviewed the cumulative netloss performance and loss projections
for quarterly origination vintage static pools. Additionally,we
looked at recent securitization performance. For the quarterly
origination vintage projections,we observed that the loss proxies
were higher for the 2019 and 2018 vintages compared to the2017 and
2016 vintages. For the securitization data, we observed higher loss
projections (atvarying degrees) for the 2016-1, 2016-2, 2017-1,
2018-1, and 2019-1 transactions compared withtheir respective
initial loss expectations.
We also considered the series 2020-1 pool's credit quality and
compared it with that of Prestige'sprevious pools. We noted that
the credit quality of the 2020-1 pool was overall slightly better
thanthe 2019-1 pool, driven primarily by the higher proportion of
bankruptcy loans. However, the slightincrease in longer term loans
(60-plus months) indicate possibilities of more back-ended
losses.
Based on our review of the securitization performance, the
quarterly origination static pool data,the pool characteristics,
and a forward-looking view of the economy given the measures taken
tocontain the COVID-19 pandemic, we expect the series 2020-1
transaction to experiencecumulative net losses in the 18.25%-19.25%
range.
Cash Flow Modeling
We modeled the transaction to simulate rated stress scenarios
appropriate for the assignedpreliminary ratings (see table 6).
Table 6
Cash Flow Assumptions And Results
Class
A B C D E
Preliminary rating AAA (sf) AA (sf) A (sf) BBB (sf) BB (sf)
Cumulative net losstiming(mos.)[front-end]
12/24 12/24/36 12/24/36/48/60 12/24/36/48/60/72
12/24/36/48/60/72
Net loss timing(%)[front-end]
40/60 22/61/16 16/45/26/10/3 15/42/24/10/8/2 14/41/24/9/9/2
Cumulative net losstiming(mos.)[front-end]
12/24 12/24/36 12/24/36/48 12/24/36/48/60/72
12/24/36/48/60/72
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Table 6
Cash Flow Assumptions And Results (cont.)
Net loss timing(%)[back-end]
37/63 20/64/16 12/39/36/13 10/35/32/20/3/1 10/35/30/20/5/3
ABS voluntaryprepayments (%)
Year 1:1.20; year
2: 1.00;year 3:
0.70; year4 and
after: 0.60
Year 1: 1.20;year 2: 1.00;year 3: 0.70;
year 4 andafter: 0.60
Year 1: 1.20; year 2:1.00; year 3: 0.70;
year 4 and after:0.60
Year 1: 1.20; year 2:1.00; year 3: 0.70; year
4 and after: 0.60
Year 1: 1.20; year 2:1.00; year 3: 0.70; year
4 and after: 0.60
Recoveries (%) 35 35 35 35 35
Recovery lag (mos.) 5 5 5 5 5
Servicing fee (%) 2.75 2.75 2.75 2.75 2.75
Weighted avg. APRdrift (bps)
(3) (3) (3) (3) (3)
Approximatebreak-even levels(%)(i)
55.4 48.3 38.7 33.7 26.1
(i)The maximum cumulative net losses on the pool that the
transaction can withstand without triggering a payment default on
the relevant noteclasses. ABS--Absolute prepayment speed.
APR--Annual percentage rate. Bps--Basis points.
For several years, Prestige has used a customer rewards program
under which it can reduce aborrower's APR by up to 0.5% for every
consecutive three-month period that the borrower makeson-time
payments and maintains full-coverage insurance, up to a maximum
2.0% reduction eachyear. The minimum APR allowed under the rewards
program is 14.0%, and no borrower who has anAPR less than or equal
to 14.0% can qualify for the program. To account for this program
in ourstress runs, we modeled a weighted average drift of -3 bps
per month based on the monthlyorigination static pool data that
Prestige provided to us.
The break-even results show that the preliminary rated class A
through E notes arecredit-enhanced to the degree necessary to
withstand a stressed net loss level consistent withthe assigned
preliminary ratings.
Sensitivity Analysis
In addition to running break-even cash flows, we ran a
sensitivity analysis to see howhigher-than-expected losses can
affect the preliminary ratings on the notes (see table 7 and
chart8).
Table 7
Scenario Analysis Summary
Loss level (%) 30.94
Loss timing (month 12/24/36/48) (%) 20/37/25/19
Voluntary ABS (%) 1.20
Recoveries (%) 35.0
Recovery lag (mos.) 5
Servicing fee (%) 2.75
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Table 7
Scenario Analysis Summary (cont.)
Weighted avg. APR drift (bps) (3)
Haircut to excess spread (%) 10
ABS--Absolute prepayment speed. APR--Annual percentage rate.
Bps--Basis points.
Chart 8
Our sensitivity analysis allows us to simulate a moderate, or
'BBB', loss scenario to determine thedegree to which the ratings
are susceptible to a negative rating action. Based on this
analysis, wehave found that the preliminary ratings are consistent
with the credit stability limits specified bysection A.4 of the
Appendix contained in our article, "S&P Global Ratings
Definitions," publishedAug. 7, 2020.
Money Market Tranche Sizing
The proposed money market tranche (class A-1) has a 12-month
legal final maturity date (Oct. 15,2021). To test whether the money
market tranche can be repaid by month 12, we ran cash flowsusing
assumptions to delay the principal collections during the 12-month
time period. Weassumed zero defaults and a zero absolute prepayment
speed for our cash flow run, and wechecked that only 11 months of
principal collections would be sufficient to pay off the
moneymarket tranche.
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Legal Final Maturity
To test the legal final maturity dates set for classes A-2, B,
C, and D, we determined the date onwhich the respective notes were
fully amortized in a zero-loss, zero-prepayment scenario andthen
added three months to the result. Furthermore, in the break-even
scenario for eachrespective rating level, we confirmed that there
was sufficient credit enhancement both to coverlosses and to repay
the related notes in full by legal final maturity. We calculated
the legal finalmaturity for class E by adding 72 months (the
longest loan term), the approximately four-monthprefunding period,
and an additional twelve months to accommodate recoveries and
extensions.
Prestige
Prestige was incorporated under the laws of Utah in September
1994, and is one of the entitiesthat constitute the Larry H. Miller
Group of Companies (the Miller Group). The Miller Group is agroup
of legally separate companies that Mrs. Karen G. Miller, widow of
the late Mr. Larry H. Miller,owns, controls, or operates
individually and as sole trustee of a certain trust. In addition
toPrestige, the Miller Group includes more than 60 automobile
dealerships in the western U.S., theNational Basketball Assn.'s
Utah Jazz, the Vivint Smart Home Arena, Jordan Commons
(a359,000-sq.-ft. office and entertainment complex), more than 15
large movie theater complexes,the Salt Lake Bees baseball team (a
member of the Pacific Coast League and Triple A affiliate ofMajor
League Baseball's Angels), a radio station, three insurance
companies, and numerous otherreal estate and business ventures. At
year-end 2019, the Miller Group had an estimated $3.9billion in
total assets and an estimated $5.7 billion in total revenues, and
it employed more than10,000 people.
Under the guidance of a board of directors, Miller Management
Corp. generally oversees thefinancial services-related entities
within the Miller Group. Prestige operates under thismanagement
umbrella as a stand-alone legal entity with separate operational
management.
Prestige is a financial services company specializing in
automobile financing. It acquires andservices retail automobile
installment purchase contracts secured by either new or used
vehiclesthat both Miller Group and non-Miller Group dealerships
generate. Prestige's target market iscredit-impaired buyers who
have offsetting strengths, such as relatively stable
employment,income, and residential history, as well as a history of
paying previous credit as agreed.
Related Criteria
- Criteria | Structured Finance | Legal: U.S. Structured Finance
Asset Isolation AndSpecial-Purpose Entity Criteria, May 15,
2019
- Criteria | Structured Finance | General: Counterparty Risk
Framework: Methodology AndAssumptions, March 8, 2019
- Criteria | Structured Finance | General: Incorporating
Sovereign Risk In Rating StructuredFinance Securities: Methodology
And Assumptions, Jan. 30, 2019
- General Criteria: Methodology For Linking Long-Term And
Short-Term Ratings, April 7, 2017
- Criteria | Structured Finance | General: Methodology: Criteria
For Global Structured FinanceTransactions Subject To A Change In
Payment Priorities Or Sale Of Collateral Upon ANonmonetary EOD,
March 2, 2015
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- Criteria | Structured Finance | General: Global Framework For
Assessing Operational Risk InStructured Finance Transactions, Oct.
9, 2014
- Criteria | Structured Finance | General: Criteria Methodology
Applied To Fees, Expenses, AndIndemnifications, July 12, 2012
- General Criteria: Global Investment Criteria For Temporary
Investments In TransactionAccounts, May 31, 2012
- General Criteria: Principles Of Credit Ratings, Feb. 16,
2011
- Criteria | Structured Finance | ABS: General Methodology And
Assumptions For Rating U.S. AutoLoan Securitizations, Jan. 11,
2011
- Criteria | Structured Finance | General: Methodology For
Servicer Risk Assessment, May 28,2009
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2020
- Six Prestige Auto Receivables Trust 2019-1 Ratings Affirmed;
Class E Removed FromCreditWatch Negative, Sept. 23, 2020
- COVID-19 Is Testing The Resilience Of Global Structured
Finance, May 18, 2020
- Twelve Prestige Auto Receivables Trust Ratings Raised, Four
Affirmed On Four Transactions,Feb. 28, 2020
- Global Structured Finance Scenario And Sensitivity Analysis
2016: The Effects Of The Top FiveMacroeconomic Factors, Dec. 16,
2016
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Presale: Prestige Auto Receivables Trust 2020-1
Research:RationaleTransaction OverviewChanges From The PART
2019-1 TransactionTransaction Structure Payment
StructureSecuritization Performance/SurveillanceManaged
PortfolioStatic pool performance by segment
Pool Analysis S&P Global Ratings' Expected Loss:
18.25-19.25%Cash Flow ModelingSensitivity Analysis Money Market
Tranche SizingLegal Final MaturityPrestigeRelated CriteriaRelated
Research