Two Ratings Raised, Five Ratings Affirmed On Two USAA Auto Owner Trust Transactions

Stocks and Financial Services Press Releases Friday December 22, 2017 09:10
NEW YORK--22 Dec--S&P Global Ratings
OVERVIEW
  • We reviewed two USAA Auto Owner Trust transactions backed by pools of prime retail auto loans originated and serviced by USAA Federal Savings Bank.
  • We raised our ratings on two subordinated classes from USAA Auto Owner Trust 2015-1 and 2016-1.At the same time, we affirmed our 'AAA (sf)' ratings on five classes from the same transactions.

NEW YORK (S&P Global Ratings) Dec. 21, 2017--S&P Global Ratings today raised its ratings on two classes and affirmed its ratings on five classes from USAA Auto Owner Trust 2015-1 and 2016-1 (see list). The transactions are backed by prime retail auto loans originated and serviced by USAA Federal Savings Bank.

Today's rating actions reflect collateral performance to date and our expectations regarding future collateral performance, as well as each transaction's structure and credit enhancement. Additionally, we incorporated secondary credit factors, including credit stability, payment priorities under various scenarios, and sector- and issuer-specific analyses. Considering all these factors, we believe the creditworthiness of the notes remains consistent with the raised and affirmed ratings.

USAA Auto Owner Trust 2015-1 and 2016-1 are performing better than our revised loss expectation of 0.50%-0.70% and initial loss expectation of 0.60%-0.80%, respectively. Therefore, we are lowering our expectations for both series

Each transaction contains a sequential principal payment structure in which the notes are paid principal by seniority. Each also has credit enhancement in the form of a nonamortizing reserve account, overcollateralization, subordination for the higher-rated tranches, and excess spread. The credit enhancement for each of the transactions is at the specified target or floor, and each class' credit support continues to increase as a percentage of the amortizing collateral balance

For every series 2015-1 class and for the series 2016-1 class A notes, the raised and affirmed ratings reflect our view that the hard credit support alone (no credit to excess spread) as a percentage of the amortizing pool balance, compared with our expected remaining losses, is commensurate with each raised or affirmed rating. For the series 2016-1 class B notes, we incorporated a cash flow analysis to assess the loss coverage level, giving credit to excess spread. Our various cash flow scenarios included forward-looking assumptions on recoveries, timing of losses, and voluntary absolute prepayment speeds that we believe are appropriate given the transaction's performance to date. In our view, the results demonstrated that the class B notes have credit enhancement consistent with the raised rating level.

Aside from our break-even cash flow analysis, we also conducted sensitivity analyses for both series to determine the impact that a moderate ('BBB') stress scenario would have on our ratings if losses began trending higher than our revised base-case loss expectation. The results show consistency with our credit stability criteria for each raised and affirmed rating.

We will continue to monitor the performance of all of the outstanding transactions to evaluate if the credit enhancement remains sufficient, in our view, to cover our cumulative net loss expectations under our stress scenarios for each of the rated classes.


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