UACA is still selling its pools of car loans; this liquidity is good for UACA in particular and all sub-prime auto lenders in general.
Friday March 13, 3:49 pm Eastern Time
Company Press Release
S&P Assigned Ratings to UACSC 1998-A Auto Trust
NEW YORK--(BUSINESS WIRE)--S&P's CreditWire 3/13/98--Standard & Poor's today
assigned its ratings to UACSC 1998-A Auto Trust (see list below).
The ratings assigned to UACSC 1998-A Auto Trust are based on an irrevocable surety bond issued
by MBIA Insurance Corp. (MBIA, triple-'A' claims-paying ability rating). The surety bond
guarantees timely payment of interest and principal on each distribution date. The class A and I
certificateholders will also benefit from excess spread that will be trapped, at outset, in a spread
account. Standard & Poor's has determined that the underlying risk assumed by MBIA is consistent
with an investment-grade rating based on a sound legal structure, a reserve account, and first loss
coverage provided by excess spread. In addition, the 'A-1'-plus assigned rating to UACSC 1998-A
Auto Trust class A-1 certificates is based on a cash flow stress at a 0.5% Absolute Prepayment
Speed (ABS)/0.0% loss scenario, which ensures that the A-1 Money Market tranche will be
paid-off within a 12 month period ending on the March 10, 1999 distribution date.
The class I planned amortization class interest-only certificates pay 1.55% of interest per year on the
notional principal amount, which initially is scheduled to equal $183.1 million, or 80% of the initial
pool balance of $228.94 million. If prepayments fall within the range of 1.60% and 2.50% ABS, the
notional principal amount declines according to a schedule. If prepayments are higher than this range,
class I certificateholders may not receive their expected yield. In this case, instead of receiving
interest on the scheduled notional principal, investors may receive interest on a lower notional
principal amount. As a result, class I certificateholders may not receive their expected yield and
could fail to recoup their invested amount.
Standard & Poor's rating does not evaluate the possibility that class I holders might suffer a
lower-than-anticipated yield and might fail to recoup their investment as a result of prepayments
exceeding 2.50% ABS. The 'r' symbol is attached to the rating of the class I certificates to alert
investors that the certificates may experience high volatility or dramatic fluctuations in their expected
returns because of market risk.
The originator and servicer of the receivables is Union Acceptance Corp. (Nasdaq:UACA - news;
UAC). UAC originates loans from franchised dealerships in 30 states, compared to only 10 in 1994.
Loan underwriting and servicing are centralized in UAC's Indianapolis office. UAC's prime auto
portfolio stood at $1.92 billion at Dec. 31, 1997, up slightly from $1.86 billion at the end of the
fiscal period ending June 30, 1997. Growth in loan originations slowed following the introduction of
new credit scoring and origination processes in response to rising losses and delinquencies. Loans
outstanding grew by approximately 3% in the six month period between June 30, 1997 and Dec.
30, 1997 and the number of contracts originated during the first half of fiscal 1998 declined by 21%
from the 1st half of fiscal 1997.
Although UAC has tightened its credit approval process, the company continues to rely heavily on
longer-term contracts. In recent 1997 securitizations loans with original terms greater than 60 months
comprised more than 75% of total pool balances. As a result, losses will likely continue to grow past
the traditional peak loss periods of 12-15 months. Longer-term contracts are stressful on loan
performance due to the delay in building equity in the vehicle, which reduces recovery rates on
repossessions.
In light of growing loss levels, structures on the most recent securitizations have been modified to
provide greater first loss protection, primarily by adding to the spread account requirement and
lowering the I/O coupon rate. In 1998-A, 6.5% of reserve coverage is available to MBIA, prior to
a draw under its policy.
Collateral characteristics in the 1998-A pool are consistent with prior deals. The mix of new/used is
20%/80% and 78% of the contracts have remaining terms greater than 60 months. The weighted
average remaining term of used vehicle contracts is approximately eight months shorter than for new
vehicle contracts.
Standard & Poor's believes that cumulative net losses over the life of this pool will be approximately
6.00% of the initial pool balance. Credit enhancement coupled with approximately 4.55% in annual
weighted average excess spread provide MBIA with sufficient protection of expected losses at an
investment-grade level, Standard & Poor's said.--CreditWire
ASSIGNED RATINGS UACSC 1998-A Auto Trust $28.825 million 5.6111% class A-1 A-1+
money market automobile receivable backed certificates $74.725 million 5.92% class A-2
automobile receivable AAA backed certificates $45.200 million 6.05% class A-3 automobile
receivable AAA
backed certificates
$51 million 6.11% class A-4 automobile receivable backed AAA certificates $29.188 million
6.23% class A-5 automobile receivable AAA
backed certificates
Class I interest only automobile receivable backed AAAr certificates
Contact:
Michael Gonik, 212/208-5331
For more information on criteria or subscriptions:
ratings.standardpoor.com
Copyright c 1998 Business Wire. |
