S&P Rates AmeriCredit Automobile Receivables Trust
24 August 1998
S&P Rates AmeriCredit Automobile Receivables Trust Floating-Rate Notes
NEW YORK, Aug. 21 -- Standard & Poor's today assigned its
triple-'A' rating to AmeriCredit Automobile Receivables Trust's 1998-C's class
A-2, A-3, and A-4 floating-rate asset-backed notes and its 'A-1'-plus rating
to the trust's Class A-1 asset-backed notes (see list below).
The rating on the floating-rate notes is based on the insurance policies
provided by FSA Inc. (triple-'A' financial strength rating) (see list below).
Under these policies FSA unconditionally and irrevocably guarantees payment of
scheduled principal and interest. While FSA is also insuring the class A-1
5.638% notes, Standard & Poor's rating on these notes is not based on the
policy, but rather on internal credit support and conservative cash flow
projections.
Standard & Poor's has determined that the underlying transaction risk
assumed by FSA is consistent with an investment-grade rating based on a sound
legal structure and internal credit support. First loss credit coverage
consists of a cash reserve, overcollateralization of 10% that will be obtained
by using excess spread and 100% of principal collections to retire the notes
sequentially beginning with the class A-1 notes, and additional ongoing
monthly excess spread.
The class A-1 notes have a legal final maturity of 13 months and benefit
from 100% of principal collections and excess spread until they are retired.
Standard & Poor's utilized conservative cash flow assumptions to test cash
flow coverage of timely interest and repayment of principal by the final
maturity without drawing on FSA's insurance policy. These assumptions
included a slow absolute prepayment speed (ABS) of 0.5%, zero losses, high
delinquencies, purchase of subsequent receivables on the last day of the
funding period Oct. 31, 1998, and a 7% interest rate on the LIBOR based
floating-rate notes. While the rate to investors on these floating-rate notes
is uncapped, the trust has purchased a cap from an investment grade
counterparty that promises to pay investors the difference between LIBOR and
7%. The 7% LIBOR was used to minimize excess spread that would be available to
turbo the A-1 class.
The originator and servicer of the receivables is AmeriCredit Financial
Services Inc., a wholly owned subsidiary of AmeriCredit Corp. AmeriCredit
purchases indirect subprime auto receivable contracts from
manufacturer-franchised dealers and independent used car dealers. The
company's mix of business has steadily moved toward franchised dealers as they
represented 90% of the volume purchased during the fiscal year ended
June 30, 1998, compared to 83% for the fiscal year ended June 30,1997, 77% for
the fiscal year ended June 30, 1996, and 68% for the fiscal year ended
June 30, 1995. AmeriCredit's underwrites receivables through its 129 branch
offices and collects and services them in its three collection centers in Fort
Worth, Texas, Tempe, Ariz., and Charlotte, N.C. Due to geographical expansion
and increased penetration in existing markets, AmeriCredit's serviced
portfolio doubled two years in row, increasing to $2.3 billion at
June 30, 1998 from $1.1 billion at June 30, 1997, and $500 million at
June 30, 1996.
Despite rapid growth in AmeriCredit's portfolio over the last two years,
its performance has been stable and is beginning to improve. Delinquencies
(including unsold repossessions) declined to 8.9% at June 30, 1998 from
11.0% at June 30, 1997, and 10.6% at June 30, 1996. In addition, net
charge-offs decreased to 5.3% for the fiscal year ended June 30, 1998 compared
to 5.5% for the same period last year. The improvement is attributable to
AmeriCredit broadening its credit spectrum to include less risky borrowers as
evidenced by the APR on its securitized pools shrinking to 18.4%, from 20.4%
two years ago.
The trust is composed of $500 million in subprime retail installment
sales contracts and $75 million in the prefunding account. Overall, the pool
appears to be of slightly better credit quality than AmeriCredit's last
transaction, 1998-B. The weighted average annual percentage rate for the
1998-C notes is 18.4%, compared to 18.8% for 1998-B and the percentage of new
cars has increased to approximately 22% from 1998-B's 16%. The weighted
average original maturity of the contracts is unchanged at 57 months and the
weighted average remaining maturity is 57 months versus 55 months for 1998-B.
While the company has started to offer 72-month contract terms to its better
quality obligors, these longer term contracts represent less than 1% of the
securitized pool. The largest state concentrations continue to be California
(14%) and Texas (9.5%).
Standard & Poor's expects the 1998-C pool to experience cumulative net
losses between 9.0%-10.5%. Internal credit enhancement in the form of a
spread account, 10% overcollateralization, additional monthly excess spread,
and stressed cash flows provide adequate liquidity and credit coverage for the
'A-1'-plus rating on the class A-1 notes. These notes have a legal final
maturity of 13 months. Internal credit support for class A-2, A-3, and A-4
notes, which mature sequentially from Oct. 15, 2001 to June 15, 2005, provides
FSA with a multiple of expected losses that is consistent with an investment-
grade rating.
This is AmeriCredit's 14th securitization, and its 10th public one. The
prior transactions were also insured by FSA and rated by Standard & Poor's. --
CreditWire
New Ratings Assigned
AmeriCredit Automobile Receivables Trust 1998-C
Class Issue Rating
A-1 $120 million 5.638% asset-backed notes A-1+
A-2 $190 million floating-rate asset-backed
notes AAA
A-3 $107 million floating-rate asset-backed
notes AAA
A-4 $158 million floating-rate asset-backed
notes AAA