Westcorp Announces Ratings Upgrade of Subisidary; $1.2 Billion Securitization Transaction
IRVINE, Calif.--July 30, 2001--Westcorp , the financial services holding company whose principal subsidiaries are WFS Financial Inc and Western Financial Bank, today announced that Moody's Investors Service has upgraded the debt ratings of its subsidiary, Western Financial Bank, based on the company's improving operating results and risk profile.Moody's upgraded the bank's long-term bank deposit, issuer and subordinated debt ratings to Ba2, Ba3 and B1, respectively. The rating outlook is stable.
In its review, Moody's noted that returns on the company's automobile lending portfolio have improved materially over the past several years, and that the company has reduced its operating costs. Moody's also cited improvement in the company's automobile lending portfolio as support for the upgrade.
Additionally, Moody's noted that the company has increased the sophistication of its customer scoring for automobile contract underwriting and servicing, and it has increased its proportion of "prime" borrowers.
The rating agency also addressed the company's funding strategy saying that the company has taken advantage of its deposit-raising capacity and is an active automobile asset-backed securitizer. These sources provide a strong liquidity base for the company. The rating agency also noted that the company's improved effective leverage level reflected its ability to access the equity capital markets.
"The ratings upgrade illustrates the significant improvements we have made at Westcorp over the past several years," said Joy Schaefer, president of Westcorp.
"These improvements are reflected in the strong earnings results that we've experienced over the past few years even as we eliminated non-cash gain on sale securitization transactions and added significant provisions for credit losses as we transition our earnings presentation to a portfolio lending basis.
"We expect that we will continue to report improving earnings each quarter for the remainder of the year and into 2002 as our GAAP earnings rise up to our earnings reported on a portfolio basis."
Westcorp also announced today the pricing of a $1.2 billion offering of automobile receivable asset-backed securities. The offering was lead managed by Credit Suisse First Boston and co-managed by Banc of America Securities LLC, Deutsche Banc Alex. Brown, and Salomon Smith Barney. This offering is expected to close on Aug. 8, 2001.
The transaction was increased by $200 million due to significant investor demand.
The securities will be issued via an owner trust, WFS Financial 2001-C, in four classes of Notes:
Security Amount Average Life (yrs) Price Interest Rate A-1 Notes $180,000,000 0.43 100.00000 3.63625% A-2 Notes $300,000,000 1.00 99.99640 3.97000% A-3 Notes $410,000,000 2.00 100.00000 3 mo. LIBOR + 0.14% A-4 Notes $310,000,000 3.35 99.98998 5.18000% Total $1,200,000,000
The Class A-1, A-2 and A-4 Notes are priced on a fixed rate basis while the Class A-3 Notes are priced on a variable rate basis in order for the company to take full advantage of the current interest rate environment, as well as to expand its current base of investors.
"The gross interest spread for this transaction was 940 basis points, more than 175 basis points better than the average interest margins on the securitization transactions we closed last year," said Schaefer. "Our significantly improving net interest margins enhance our ability to continue to achieve improving earnings over the next few years."
The Class A-1 Notes will be rated A-1+ by Standard & Poor's and Prime-1 by Moody's. The Class A-2, A-3 and A-4 Notes will be rated AAA by Standard & Poor's and Aaa by Moody's. Timely principal and interest payments on the notes are guaranteed by an insurance policy provided by Financial Security Assurance Inc.
The rating by Standard & Poor's of the Class A-1 Notes will be issued without regard to the benefit afforded by the Note Policy. The ratings by Standard & Poor's of the Class A-2, A-3 and A-4 Notes, as well as the ratings by Moody's of all of the notes will be based on the issuance of the Note Policy by FSA.
Westcorp and its affiliates are the fourth largest issuer of automobile asset-backed securities in the United States, having issued a total of $22.6 billion of such securities in 53 transactions to date.
Westcorp is a financial services holding company whose principal subsidiaries are WFS Financial and Western Financial Bank. Westcorp is a publicly owned company whose common stock is traded on the New York Stock Exchange under the symbol WES. Information about Westcorp can be found at its Web site at http://westcorpinc.com.
Westcorp, through its subsidiary, WFS, is one of the nation's largest independent automobile finance companies. WFS specializes in originating, securitizing, and servicing new and pre-owned prime and non-prime credit quality automobile contracts through its nationwide relationships with automobile dealers. Information about WFS can be found at its Web site at http://www.wfsfinancial.com.
Westcorp, through its subsidiary, Western Financial Bank, operates 25 retail bank branches throughout California and provides commercial banking services in Southern California. Information on the products and services offered by the bank can be found at its Web site at http://www.wfb.com.
This news release contains forward-looking statements. These forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ significantly from historical results or from those anticipated by the company. The most significant risks and uncertainties the company faces are the level of charge-offs, as an increase in the level of charge-offs will decrease its earnings; the company's ability to originate new contracts in a sufficient amount to reach its needs, as a decrease in the amount of contracts it originates will decrease its earnings; a decrease in the difference between the average interest rate the company receives on contracts it originates and the rate of interest it must pay to fund such contracts, as a decrease will reduce its earnings; the continued availability of sources of funding for its operations, as a reduction in the availability of funding will reduce its ability to originate contracts; the level of notes treated as secured financings, as the level will impact the timing of revenue recognized; and the level of operating costs, as an increase in those costs will reduce its net earnings.
There are other risks and uncertainties the company faces, including the effect of changes in general economic conditions and the effect of new laws, regulations and court decisions. You are cautioned not to place undue reliance on forward-looking statements. You should carefully review the factors referred to above and other documents the company files from time to time with the Securities and Exchange Commission, including quarterly reports on Form 10-Q and annual reports on Form 10-K.