Agos Ducato markets 895 million euros of bonds backed by consumer loans

Italian lender Agos Ducato SpA, a subsidiary of Crédit Agricole SA, is sponsoring its 14and securitization of consumer loan issues for a total of 895 million euros (1.05 billion dollars).

The Sunrise SPV 20 Srl transaction involves 124,768 loans secured by purchases of vehicles, furniture and personal loans, and includes a 12-month renewable period during which additional collateral meeting the pool’s minimum criteria can be purchased. The loans have an average balance of €7,173 and a weighted average interest rate of 7.2%, according to pre-sale reports.

Most of the collateral (75%) is in unsecured personal loans, which have historically higher default rates than most other consumer loan products, according to Moody’s Investors Service. Additionally, 75% of loans have flexible payment options allowing debtors to defer up to five installments over the life of the loan.

The loans, which have been seasoned for an average of six months, have a remaining term of 6.4 years.

The €582.1 million of Class A bonds are rated Aa2 by Moody’s and AA (high) by bond rating agency DBRS.

The A Notes have a credit enhancement of 35.2%, as measured by Moody’s; DBRS places the CE at 35.6%. These are the subordination of four categories of junior bonds, an annualized excess spread of 4.8% and an initial cash reserve account of 0.5%.

Moody’s expects cumulative defaults to reach 7.5% over the life of the deal and collections of 10%.

Agos entered into a fixed-floating interest rate swap agreement with Crédit Agricole to hedge the interest rate risk between the fixed rate loan collateral and the Class A bonds based on the one-month Euribor rate .

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