Foursight Capital finances the premium through subprime auto loans with $209 million in ABS

Returning for its second securitization of 2022 and its twelfth auto securitization overall, the Foursight Capital Automobile Receivables Trust is set to raise some $209.1 million in asset-backed securities (ABS), in a deal that will take a better combination of first-class guarantees, and the so-called Greenlight loans.

Greenlight loans refer to certain loans, primarily in the subprime and quasi-prime segments, for which Foursight has taken out insurance policies, to cover any deficiency balances on defaulted contracts and related vehicle liquidation proceeds, according to the Kroll Bond rating agency.

JPMorgan Securities is the structuring lead manager of the transaction, with Vervent acting as backup manager and Foursight Capital as originator, sponsor, depositary and manager. The latter is a wholly owned subsidiary of Jefferies Financial Group that provides installment auto loans.

A mix of prime, non-prime and subprime retail auto installment contracts secures the deal, with FICO scores ranging from 580 to 680, according to S&P Global Ratings.

Foursight Capital, 2022-2, will issue fixed rate notes from a senior subordinated capital structure, and unlike Foursight Capital, 2022-1, the deal does not have pre-funding in place, S&P said.

In another change from previous agreements, the initial firm credit enhancement for Class A, B, C and D notes increased to 30.7%, 24.3%, 16.4% and 8.7% , respectively. This compares to the initial hard credit enhancement rates of 26.7%, 19.7%, 15.9% and 4.4%, also respectively on the same classes.

In terms of credit enhancement, the transaction has an initial overcollateralisation level of 8.0%. Foursight Capital, 2022-2, also has a cash reserve account equal to approximately 0.74% of the initial pool balance, plus subsequent loan balances. Additionally, the deal is expected to have an excess spread of 5.75%, according to KBRA.

S&P expects to assign ratings ranging from “A-1+” to the $34.3 million Class A-1 notes; and “AAA” on the $88.7 million A-2 Notes and $40 million A-3 Notes, all of which are senior notes.

Ratings range from “AA” on B ratings to “BBB” on D ratings, according to S&P.

For its part, KBRA plans to assign grades of “K1+” to A-1 grades; ‘AAA’ on A-2 and A-3 tickets; and ‘AA+’ to ‘BBB’ on classes B to D.