PenFed Credit Union Receives Ratings Upgrade from S&P Global

PenFed Credit Union Achieves Significant Ratings Upgrade

S&P Global Ratings has recently enhanced the ratings for two classes of bonds associated with PenFed Auto Receivables Owner Trust 2022-A, while affirming three other classes. This positive news comes as PenFed Credit Union, recognized as the nation's second-largest federal credit union, continues to showcase a solid performance in the competitive auto loan market.

Details Behind the Recent Ratings Action

The upgraded ratings stem from an impressive track record of the assets backing the PenFed Auto Receivables Owner Trust 2022-A (PNFED 2022-A). Specifically, S&P adjusted the cumulative net loss (CNL) expectations for this transaction, reducing the previous estimate from 0.70 bps to a more favorable 0.40 bps. Initially, at the time of the offering’s closing, the original CNL expectation was set between 1.40 and 1.60 bps, highlighting a marked improvement in asset performance over time.

Changes to Tranche Ratings

As part of these rating changes, S&P upgraded Class C and Class D tranches from "AA+" and "AA" to an impressive "AAA". Furthermore, the A-3, A-4, and B tranches also maintained their "AAA" rating. This results in all outstanding tranches of the PNFED 2022-A transaction now carrying a strong "AAA" rating, which indicates a high level of creditworthiness.

Factors Influencing the Ratings Upgrade

The analytics performed by S&P witnessed the transaction's favorable performance so far, alongside expectations around future collateral outcomes. Also considered were essential secondary factors related to credit stability, sector analysis, and specifics related to the issuer, ultimately reflecting positively on the credit ratings assigned. S&P's expectations concerning the ongoing stability ensure confidence in the transaction's structure and credit enhancement measures implemented.

PenFed's Strong Position in the Market

In August 2022, PenFed executed a significant issuance within this securitization, totaling $460,292,000 in fixed-rate, amortizing asset-backed notes. These notes are secured by prime auto loans and are structured as private placements, contingent upon compliance with Rule 144A for qualified institutional buyers. The asset-backed notes issued represent a careful composition of senior and subordinate tranches, meticulously rated by leading agencies.

Expanding Loan Portfolios

PenFed Credit Union boasts the second-largest consumer loan portfolio within the credit union industry, encompassing a range of products such as auto, personal, student loans, and credit cards. The auto loan portfolio, in particular, stands out due to its extensive reach, incorporating originations from all 50 states and Puerto Rico, showcasing the organization's strong national presence.

About PenFed Credit Union

Founded in 1935, Pentagon Federal Credit Union (PenFed) has grown into a prominent financial institution serving 2.8 million members across the globe. With over $32.7 billion in assets, PenFed provides a comprehensive suite of financial services, including competitive certificates, checking accounts, personal loans, mortgages, auto loans, and more. Ensuring members’ interests remain a priority, PenFed operates under federal insurance by the NCUA and maintains its status as an Equal Housing Lender.

Frequently Asked Questions

1. What recent ratings upgrade did PenFed Credit Union receive?

S&P Global Ratings upgraded ratings on two classes and affirmed three classes for PenFed Auto Receivables Owner Trust 2022-A.

2. What is CNL, and how has it changed for PenFed's securitization?

The cumulative net loss (CNL) expectations for the PNFED 2022-A transaction were revised down from an estimated 0.70 bps to 0.40 bps.

3. How many classes in PenFed's securitization have received a "AAA" rating?

All outstanding tranches of the PNFED 2022-A transaction now carry a "AAA" rating.

4. When was the asset-backed note issuance that PenFed executed?

PenFed issued $460,292,000 in asset-backed notes in August 2022.

5. How does PenFed Credit Union serve the consumer loan market?

PenFed has one of the largest consumer loan portfolios among credit unions, covering various types of loans including auto and personal loans across the U.S. and Puerto Rico.

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