Foursight Capital funds $209 million in prime-through subprime auto loans with ABS

Foursight Capital Automobile Receivables Trust is returning for its second securitization of 2022 and its twelfth auto securitization overall and is expected to raise approximately $209.1 million in asset-backed securities (ABS) in a transaction that will provide an enhanced mix of first-class collateral, and so-called greenlight loans.

Greenlight loans, according to the Kroll Bond Rating Agency, refer to certain loans, primarily in the sub-prime and near-prime segments, for which Foursight has purchased insurance policies to cover any shortfalls arising from the defaulted contracts and the liquidation proceeds of the associated vehicle.

JPMorgan Securities is the structuring lead manager of the transaction, with Vervent acting as backup service provider and Foursight Capital as originator, sponsor, custodian and service provider. The latter is a wholly owned subsidiary of Jefferies Financial Group, which offers car installment loans.

A mix of premium, sub-prime, and sub-prime retail auto rate deals backs 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 transaction has no pre-funding, S&P said.

In another change from previous deals, the initial hard credit enhancement for A, B, C and D grade notes rose to 30.7%, 24.3%, 16.4% and 8.7%, respectively. This compares to initial credit improvement rates of 26.7%, 19.7%, 15.9% and 4.4%, also for the same grades, respectively.

In terms of credit enhancements, the deal has an initial overcollateralization of 8.0%. Foursight Capital, 2022-2 also has a cash reserve account of approximately 0.74% of the initial pool balance and subsequent loan balances. Additionally, according to KBRA, the deal is expected to have an excess margin of 5.75%.

S&P expects to rate the $34.3 million Class A-1 Notes in the range of ‘A-1+’; and ‘AAA’ on both the $88.7 million, A-2 Notes and the $40 million, A-3 Notes, all of which are the Senior Notes.

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

For its part, KBRA expects to award ratings of ‘K1+’ on the A-1 grades; ‘AAA’ on notes A-2 and A-3; and ‘AA+’ through ‘BBB’ in grades B through D.

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