Chase Manhattan Bank has completed a $1.5 billion securitization of car and truck loans in what was said to be the largest-ever transaction of its kind by a lender not affiliated with an automobile manufacturer.
The Sept. 8 sale is a move by Chase to cash in on $6 billion in auto loans it originated this year by moving them off its balance sheet.
"We are moving more toward becoming an originator, seller, and servicer of auto loans," said Jim Brew, president of Chase Automotive Finance. He said this would ultimately make the company "less balance-sheet dependent and more servicing oriented."
The auto-backed deal is Chase's third such offering in four years. In 1991, the company did a $490 million auto-backed securitization and followed up in April 1993 with a $750 million offering.
The success of those earlier deals was an important factor in the triple-A rating on the latest offering, said Hiromi Mizota, an asset-backed securities analyst with Moody's Investors Service Inc.
Ms. Mizota said the 1991 offering was paid off in March after experiencing minuscule cumulative losses of 0.53% of the original outstanding balance. By comparison, the loss history of loans pooled for the current offering is around 12 basis points.
"Chase Auto has a very strong operation, as you can tell by their loss performance," she said.
However, she said low loss rates are typical for banks, which usually focus on prime-rated borrowers. By contrast, some lenders tolerate higher loss rates as a part of company strategy.
"Just because some companies have higher losses doesn't mean they don't know what they're doing," she said. "It really depends on the mission of the different companies."
Chase once directed its auto efforts toward the upper end of the consumer scale, Mr. Brew said, but these days its scope is wider.
The latest offering, underwritten jointly by Chase Securities Inc. and Chemical Securities Inc., was oversubscribed, Mr. Brew said. It got a strong reception even though the cash collateral pool backing the certificates amounted to 5% of the original balance, compared with an industry norm of 9% to 12%.
As a result of investor demand, the deal carries a pass-through payment equal to 6% per year, 43 basis points over comparable-maturity Treasury securities.
