KBRA Assigns Preliminary Ratings to First Investors Auto Owner Trust 2025-1, Marking Stellantis Financial Services’ First Term ABS of the Year
Kroll Bond Rating Agency, LLC (KBRA) has assigned preliminary ratings to six classes of notes issued by First Investors Auto Owner Trust 2025-1 (FIAOT 2025-1), an asset-backed securitization (ABS) backed by a pool of automobile loans originated by Stellantis Financial Services, Inc. (doing business as First Investors Financial Services, or “SFS”). The transaction marks the first term ABS issuance in 2025 for the company and represents its fourth securitization since being acquired by Stellantis N.V. in 2021.
With a total issuance of $350 million across six tranches, FIAOT 2025-1 reinforces Stellantis Financial Services’ strategy of leveraging the securitization market to fund its growing auto loan portfolio. The structure of this latest transaction, along with the preliminary ratings assigned by KBRA, reflects both the solid credit performance of SFS-originated receivables and the company’s enhanced position as the captive finance arm of one of the world’s largest automakers.
Transaction Overview
FIAOT 2025-1 consists of six classes of notes, each benefiting from varying degrees of credit enhancement to protect investors against potential losses. The total collateralized pool of $350.0 million will be distributed across the following classes: Class A-1, Class A-2, Class A-3, Class B, Class C, and Class D.
KBRA assigned preliminary credit ratings to each class based on a detailed analysis of the underlying loan pool, transaction structure, and historical performance of similar portfolios managed by SFS. The initial credit enhancement levels range from 41.75% for the senior tranches (Classes A-1, A-2, and A-3) down to 14.25% for the subordinate Class D notes.
These enhancements are achieved through a combination of structural features, including subordination, overcollateralization, a reserve account, and the presence of excess spread generated by the difference between interest income on the underlying assets and the cost of funds on the issued notes. Except for the Class D tranche, each class benefits from subordination, meaning the lower-rated tranches absorb losses before they impact senior noteholders.
About Stellantis Financial Services (SFS)
SFS plays a central role in the financing ecosystem of Stellantis N.V., the multinational automotive manufacturing corporation formed through the merger of Fiat Chrysler Automobiles and PSA Group. SFS operates under the trade name First Investors Financial Services, a brand long recognized in the U.S. auto lending market for its focus on subprime and near-prime credit segments.
Prior to its acquisition by Stellantis, SFS primarily operated through two business lines:
- Legacy Indirect Program: Through this channel, the company purchased subprime automobile retail installment contracts (RICs) originated by select non-Stellantis franchise dealerships across the United States. This program formed the foundation of the company’s indirect lending strategy and contributed to its established expertise in assessing credit risk for lower-tier borrowers.
- Legacy Direct Program: Complementing the indirect channel, SFS also refinanced existing subprime and near-prime auto loans directly with consumers. This direct program allowed the company to build long-term relationships with borrowers and expand its balance sheet through portfolio diversification.
However, since October 2022, following integration into the Stellantis corporate ecosystem, the company has shifted toward its Captive Program—serving as an indirect finance subsidiary to Stellantis. Through this program, SFS now purchases near-prime and prime RICs and vehicle leases from approximately 2,600 Stellantis brand dealerships nationwide, including Chrysler, Jeep, RAM, Alfa Romeo, and Fiat.
This strategic pivot transformed SFS from a primarily subprime-focused lender into a full-spectrum captive finance company, providing retail financing solutions aligned with Stellantis’ automotive sales strategy in the U.S. market.
Details of the Collateral Pool
The collateral backing the FIAOT 2025-1 transaction is composed of fixed-rate automobile retail installment contracts secured by new and used non-commercial vehicles. The composition of the pool is expected to exhibit an improved credit quality mix compared to earlier SFS securitizations, reflecting the company’s growing focus on prime and near-prime borrowers through its Captive Program.
The loans are diversified across vehicle makes and models under the Stellantis umbrella, with a mix of new and used vehicles, varying terms, and a stable geographic distribution across the U.S. KBRA noted that the collateral pool benefits from strong loan-to-value (LTV) ratios, consistent borrower payment histories, and the operational discipline of an established captive finance entity.
KBRA’s Rating Methodology and Analytical Approach
In assigning the preliminary ratings, KBRA applied multiple analytical frameworks and methodologies to evaluate both the transaction structure and the underlying assets. The primary framework used was the Auto Loan ABS Global Rating Methodology, supplemented by the Global Structured Finance Counterparty Methodology and the ESG Global Rating Methodology.
The agency’s analytical process included:
- Quantitative analysis of the loan-level data, examining metrics such as FICO scores, payment histories, seasoning, remaining terms, and geographic concentration.
- Review of historical performance data from prior SFS securitizations to estimate expected default rates, loss severity, and recovery trends.
- Stress testing of key assumptions to evaluate how the transaction would perform under varying macroeconomic and credit scenarios.
- Examination of structural features, including the role of the reserve account, triggers for credit enhancement, and payment priorities under the transaction’s waterfall structure.
KBRA also conducted operational reviews of Stellantis Financial Services, assessing its underwriting standards, servicing capabilities, and data integrity processes. These operational reviews were complemented by periodic due diligence calls with company executives and verification of compliance with KBRA’s operational risk criteria.
Additionally, operative agreements and legal opinions will undergo a final review prior to the closing of the transaction to ensure compliance with KBRA’s structural and legal standards for ABS transactions.
Credit Enhancement and Structural Features
The structural integrity of FIAOT 2025-1 is a key factor in KBRA’s preliminary ratings. Credit enhancement mechanisms are designed to absorb potential losses and maintain the credit quality of the rated securities over the life of the transaction.
- Subordination: Senior tranches benefit from the protection offered by lower-rated tranches, which absorb losses first.
- Overcollateralization (OC): The collateral pool exceeds the total balance of the issued notes, providing a cushion against credit losses.
- Reserve Account: A funded reserve account serves as a liquidity buffer, ensuring timely payments to noteholders in case of short-term cash flow disruptions.
- Excess Spread: The difference between the interest earned on the collateral and the interest paid on the notes serves as an additional layer of protection, gradually building overcollateralization over time.
These features, combined with the strong operational oversight of SFS and the captive nature of its lending activities, contribute to the overall stability and resilience of the FIAOT 2025-1 transaction.
ESG and Counterparty Consideration
As part of its broader analytical framework, KBRA also incorporated Environmental, Social, and Governance (ESG) factors into its evaluation. The ESG Global Rating Methodology was applied to identify and assess potential environmental or social risks that could indirectly affect credit performance—such as shifts in consumer demand toward electric vehicles (EVs), evolving emissions standards, or regulatory developments impacting auto lending.
Additionally, KBRA reviewed the counterparty exposure within the transaction structure under its Global Structured Finance Counterparty Methodology, ensuring that all counterparties—including servicers, trustees, and backup servicers—meet minimum operational and credit standards.
Accessing Ratings and Related Documents
Investors and stakeholders can access the official preliminary ratings and transaction documents through KBRA’s website. These materials include the detailed rating report, disclosure forms, and methodology descriptions.
- Full Rating Report: Provides in-depth analysis of key credit considerations, structural features, and rating sensitivities.
- Information Disclosure Forms: Contain a comprehensive description of data sources, methodologies, and material models used in determining the credit ratings.
- Rating Definitions: Detailed explanations of each rating category and its implications for investors are available on the KBRA website.
The rating report also provides sensitivity analyses, highlighting how changes in macroeconomic conditions or collateral performance could influence potential rating upgrades or downgrades.
Significance for Stellantis Financial Services and the Auto ABS Market
The launch of FIAOT 2025-1 signals Stellantis Financial Services’ continued momentum in leveraging securitization as a strategic funding source. As the company’s first ABS transaction in 2025 and the fourth since its acquisition, it underscores the growing confidence of the capital markets in SFS’s underwriting discipline, credit performance, and integration within the Stellantis ecosystem.
By tapping the ABS market, SFS enhances its funding flexibility, reduces dependence on traditional bank financing, and improves liquidity management. The transaction also reflects broader trends in the U.S. auto ABS market, where captive finance arms of global automakers increasingly dominate issuance volumes due to their stable credit performance and diversified borrower bases.
Moreover, Stellantis’ entry into the prime and near-prime lending segments positions SFS competitively alongside other major captives such as Ford Credit, GM Financial, and Toyota Financial Services. The consistent participation of established rating agencies like KBRA reinforces investor confidence in the structural soundness of these transactions.
KBRA’s preliminary ratings on First Investors Auto Owner Trust 2025-1 affirm the strength of Stellantis Financial Services’ evolving lending platform and its disciplined approach to risk management. With a diversified loan pool, robust credit enhancement features, and a proven operational framework, FIAOT 2025-1 reflects a balance of credit quality, structural rigor, and market confidence.
As the automotive finance landscape continues to evolve—with shifting consumer credit dynamics, digital transformation, and growing ESG considerations—transactions like FIAOT 2025-1 will remain a benchmark for how global automakers’ finance arms effectively bridge retail credit and capital markets.
Source Link: https://www.businesswire.com/
