05/25/2012

CIG Is Next to Eye Subprime Auto Program

CIG Financial plans to start regularly securitizing its subprime auto loans, with the first issue on track to hit the market as early as November.

The Irvine, Calif., lender is working with underwriter Wells Fargo on an initial offering that is expected to total $150 million or more. Wells is also providing the firm with a warehouse line of credit to fund its originations prior to securitization. CIG, which envisions a program involving two or three asset-backed issues a year, is also seeking private equity partners for long-term funding.

CIG president Greg Skjonsby was in New York last week to meet with Wellsí securitization bankers and rating-agency analysts.

Wells has managed several recent issues backed by subprime auto loans, including offerings by First Investors Financial Services and American Credit Acceptance. Both were $150 million issues that priced in February.

S&P rated those deals, and itís likely to get the nod on the CIG offering. The agency has dominated the subprime auto-bond market in the first half, rating nine issues through April.

So far this year, lenders have sold $6.9 billion of bonds backed by subprime auto loans through 12 offerings, according to Asset-Backed Alertís ABS Database. Thatís about the same as the $6.6 billion sold through a dozen offerings during the same period last year.

CIG isnít the only originator preparing its first securitization of subprime auto loans. CarFinance Capital and Flagship Credit Acceptance are also laying the groundwork for debut offerings.

Investor demand for such paper has recently been healthy. Alaska Permanent Fund, MetLife and other institutions has developed heavy appetites for subprime-loan securities. Since the financial crisis, performance of subprime car loans have exceeded expectations, particularly for loans originated in 2009, 2010 and early 2011.

CIG has been originating subprime auto loans since 1990 through a growing network of dealers throughout the U.S. In 2010, Skjonsby hired former Long Beach Acceptance executive Steve Kahn, chiefly for his securitization experience. Kahn brought some of Long Beachís former staff along to CIG. Beginning in 1998, Kahn oversaw the securitization effort at Long Beach, which issued $5.2 billion of ABS in 20 deals. Long Beach was sold to AmeriCredit, now General Motors Financial, in January 2007. Kahn left in 2008.

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