S&P Report Highlights Record Auto ABS Volume

    NEW YORK--Standard & Poor's--Jan. 31, 2003--The U.S. auto loan asset-backed securities (ABS) market demonstrated tremendous resilience in 2002, according to a detailed commentary on the auto ABS sector released this week by Standard & Poor's Ratings Services.
    Growth remained unabated with total rated volume (public and private) increasing approximately 12% to a record amount of $98.5 billion. Moreover, despite the anemic economy, most prime auto finance companies reported only moderate increases in losses.
    The report, "Despite Weakened Performance, U.S. Auto Financers Drove Home Record Volume in 2002," notes that for select issuers with stellar performance and favorable pool characteristics, credit enhancement declined during the year. These companies owe their strong loan performance to the popularity of their special low-rate financing programs. These are generally offered only to the best-quality obligors, and as such, exhibit low losses.
    "There were several predominant trends last year, most notably weaker performance due to economic factors and lower used car values," said Amy Martin, a director in Standard & Poor's ABS group and co-author of the article. "More prime auto finance companies reported mild increases in delinquencies and losses in their serviced portfolios. And with respect to performance, another major trend is developing: securitization losses are becoming more back-loaded. This is because the transactions are outstanding longer due to the increased use of extensions and the addition of longer term loans."
    From a volume perspective, Standard & Poor's expects total auto ABS issuance this year to top $100 billion, with public-only volume increasing to about $90 billion from $84 billion in 2002. However, according to the report, performance is likely to continue to weaken due to the sluggish economy. Indeed, higher delinquencies at Sept. 30, 2002, do not bode well for year-end loss numbers as well as losses going into 2003. On the credit enhancement front, levels are likely to remain stable and possibly inch up.
    The second half of the commentary highlights the recent portfolio and securitization performance for the top 11 issuers of 2002, whose transactions in aggregate represented approximately 80% of last year's total auto ABS volume. These profiles also provide projected loss levels for each issuer and describe major changes, if any, in their credit enhancement structure and pool characteristics.
    Among the companies profiled are the Big Three domestic captives (Ford Motor Credit Co., General Motors Acceptance Corp., and DaimlerChrysler Services North America LLC) as well as the foreign captives, banks, nonprime finance companies, and subprime finance companies.
    "Despite Weakened Performance, U.S. Auto Financers Drove Home Record Volume in 2002" is available on RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. It is also available on Standard & Poor's Web site at www.standardandpoors.com. Go to Fixed Income, under "Browse by Sector" choose Structured Finance, and then under Commentary & News scroll down to the desired article, dated Jan. 27.
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