Fitch Enhances Ratings for PenFed Auto Loan Securitization

Fitch Ratings Upgrades PenFed's Auto Loan Securitizations

Fitch Global Ratings has recently upgraded one class and affirmed three classes of the bonds in PenFed Auto Receivables Owner Trust 2022-A, showcasing the significant performance of these securitizations.

PenFed Credit Union, one of the largest federal credit unions in the country, has received noteworthy ratings upgrades from Fitch due to the exceptional performance of its inaugural prime auto loan securitization, PenFed Auto Receivables Owner Trust 2022-A. This upgrade is a clear signal of the strong credit quality associated with the bonds issued through this initiative.

The affirmations and upgrades of the outstanding notes are a reflection of the available credit enhancement (CE) and the historical loss performance observed to date. Notably, the cumulative net losses (CNL) have been consistently lower than the original rating case proxy, indicating a robust credit performance. Since the closing of the securitization, the hard CE levels across all classes have demonstrated considerable growth.

As reported in the March evaluation date, delinquency rates of over 60 days stand at a low 0.24% of the remaining collateral balance, with the CNL at 0.29%. This performance is notably favorable as it remains significantly below the initial rating case proxy levels. The growing hard CE of the current adjusted pool balance has been confirmed across all classes. Furthermore, Fitch has affirmed the 'AAA' rating for the A-4, B, and C tranches while upgrading the D tranche to 'AAA,' previously rated as 'AA'. This results in all outstanding tranches in this transaction now holding a 'AAA' rating.

Fitch’s careful analysis led to the maintenance of conservative assumptions in establishing the rating case proxy, thanks to the strong performance witnessed historically. The rating case proxy's conservative projection stands at 0.60%. Recognizing the current economic environment's dynamics, Fitch found it prudent to adopt a conservative stance, which has proven beneficial for the transaction.

On the other hand, the base case proxy, which is devoid of any margins for safety, saw an increase from 0.30% to 0.40%, taking into account the overarching macroeconomic conditions. The modeling of cash flow produced positive multiples exceeding 5.0x for the 'AAAs' across each class, reinforcing the strong credit standing of PenFed’s asset-backed securities.

The issuance in August 2022 saw PenFed launch $460,292,000 in fixed-rate, amortizing asset-backed notes secured by prime auto loans. These notes are part of a private placement offering, exclusively made available to qualified institutional buyers as per Rule 144A. The asset-backed notes were rated by prominent agencies like S&P and Fitch, ensuring a high level of trust and reliability in this financial product.

In terms of its standing among credit unions, PenFed proudly holds the title of having the second-largest consumer loan portfolio, spanning auto loans, personal loans, student loans, consumer loans, and credit cards. Additionally, with one of the most significant auto loan portfolios within federal credit unions, PenFed's reach extends across all 50 states and Puerto Rico.

About PenFed Credit Union
Founded in 1935, Pentagon Federal Credit Union (PenFed) is among America's largest federal credit unions, boasting nearly 3 million members globally and managing $31 billion in assets. PenFed is committed to providing market-leading financial products including certificates, checking, credit cards, personal loans, auto loans, mortgages, and much more, placing members' interests at the forefront. The credit union is insured federally by the NCUA and practices equal housing lending.

To discover more about PenFed Credit Union, visit PenFed.org, connect with us on Facebook, and follow us @PenFed on X.

Interested in building a career with PenFed? Check us out on LinkedIn. We are an Equal Employment Opportunity Employer.

Frequently Asked Questions

1. What recent upgrades did Fitch Ratings make for PenFed?

Fitch upgraded one class and affirmed three classes of bonds in PenFed's auto loan securitization as part of its regular review process.

2. What performance metrics influenced these upgrades?

The upgrades were mainly driven by low cumulative net losses and strong delinquency rates, indicating good credit quality.

3. What is the significance of the tranches' 'AAA' ratings?

The 'AAA' ratings suggest top-tier credit quality and a strong capacity to meet payment obligations, which enhances investor trust.

4. How much did PenFed issue in their 2022 securitization?

PenFed issued $460,292,000 of fixed-rate, amortizing asset-backed notes in August 2022, backed by prime auto loans.

5. Where can I find more information about PenFed?

For more information, you can visit PenFed's official website at PenFed.org.

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