S&P Rates Continental Auto Receivables Grantor Trust
15 June 1999
S&P Rates Continental Auto Receivables Grantor Trust
NEW YORK--Standard & Poor's--June 15, 1999-- Standard & Poor's today assigned its triple-'A' rating to Continental Auto Receivables Grantor Trust's 1999-1 $60 million class A-1 6.595% certificates and $36.5 million class A-2 6.495% certificates.The rating on the class A-1 and class A-2 certificates is based on an irrevocable and unconditional bond insurance policy provided by MBIA Insurance Corp. (MBIA; triple-'A' insurer financial strength rating) that guarantees timely payment of principal and interest. The underlying transaction risk assumed by MBIA has been determined to be consistent with an investment-grade rating based on a sound legal structure and internal credit support. Credit enhancement consists of a reserve account and annual excess spread of approximately 2.25%.
The transaction is structured as a sale of assets from Continental Auto Receivables Inc. (the originator and servicer of the contracts) to Continental Auto Receivables Corp., a bankruptcy-remote special purpose corporation, and a subsequent sale and assignment of the assets from Continental Auto Receivables Corp. to Continental Auto Receivables Grantor Trust 1999-1.
Continental Auto Receivables Inc., founded in 1997 by a team of experienced former senior banking executives, is a specialized consumer finance company engaged in the acquisition and servicing of prime retail installment contracts secured by new and used automobiles and light duty trucks. Continental's Columbus, Ohio, headquarters and regional offices in Detroit and Pittsburgh are currently purchasing contracts from a network of almost 500 dealers. The contracts are originated and serviced in the individual offices.
Due to the limited nature of Continental's performance data, Standard & Poor's closely reviewed the past static pool and securitization performance of the team of executives. Overall, those pools indicate that management's cumulative net loss levels have generally not exceeded 1.25%. In addition, Continental's underwriting guidelines and loan characteristics were closely analyzed and compared to other companies in the industry originating and servicing 'A-' quality contracts.
The 1999-1 receivables pool is composed of approximately $96.5 million in retail installment sales contracts. The weighted average annual percentage rate (APR) is approximately 10.01%. The largest state concentration is Michigan (58%), and the weighted average original maturity and seasoning are 60.5 months and less than three months, respectively. Used cars make up approximately 68% of the initial receivables pool.
Standard & Poor's expects the 1999-1 pool to experience approximately 3% in cumulative net losses. A reserve account along with additional excess spread provide MBIA with a multiple of expected losses that is consistent with an investment-grade rating. This is Continental's second private asset-backed transaction and second grantor trust structure, both rated by Standard & Poor's. ---CreditWire