On the starting line

Angle Auto Finance is new to the market following its acquisition of Westpac Banking Corporation’s dealer and novated leasing lending business in 2021. But it is already at the stage where a debut asset-backed securities deal could come within months. Its links to international investors should smooth execution, according to Jason Murray, the auto lender’s Sydney-based chief financial officer.

Angle Auto has been established for just less than a year. How is the business structured, how are originations progressing and what are its growth prospects?

Angle Auto is a nonbank lender providing automotive financing to the one in five Australian consumers who finance their purchase at point of sale. The business operates through a national network of automotive dealers and Australia’s leading salary novated lease providers.

Angle Auto is a portfolio company of Cerberus Capital Management, a global leader in alternative investing with US$55 billion in assets under management. However, Angle Auto is a standalone auto financier and operates independently, with a separate board of directors, and its own management team and servicing platform.

Angle Auto has distinct funding warehouse facilities to support its floorplan and retail lending activities. The business is operated and managed separately to Angle Asset Finance.

Having completed the transition of all major dealers and novated lease introducers, the business is now operating at scale and has room to grow. Angle Auto’s rapid and seamless lending approvals are popular with introducers and we expect this to drive growth. A clear risk appetite, strong and accessible distribution and credit teams, as well as technology that powers and accelerates business momentum, supports this platform.

Angle Auto completed the transition in March 2022 and has scaled rapidly, settling more than A$1.3 billion (US$881.2 million) of retail and commercial loans, and novated leases into its retail warehouse as of August 2022. It has also grown the floorplan portfolio by about 10 per cent since acquisition.

Angle Auto has two wholesale and one retail-focused funding warehouse. What are the terms of these warehouses and how are they structured?

Angle Auto established a sustainable and scalable warehouse funding platform aligned with business strategy and with flexibility and optionality for growth. The company currently has three scalable funding warehouses in place, supporting the dealer floorplan and retail lending channels.

The retail warehouse has the capacity to fund retail, commercial and novated leases, and new and used collateral for individuals and SMEs within Australia. The floorplan facility primarily funds dealer stock but also has capacity to support capital loans to dealers.

Angle Auto is yet to issue a public securitisation. When should the market expect a deal, and at what size and how often will Angle Auto tap the market?

Given anticipated growth, the company has accelerated the development of its term securitisation platform and plans to launch a global roadshow in coming months, ahead of an inaugural asset-backed securities [ABS] deal.

This transaction will represent a key milestone and provide a wide range of investors with regular access to high-quality ABS and an alternative to Australian residential mortgagebacked securities.

The company will build out its ABS issuance programme through calendar 2023 and ultimately plans to be in market with about A$2.5-3 billion per year as it grows.

Are international investors a target for Angle Auto’s securitisation funding programme?

As with all large programmatic issuers, international investors will play an important role in the success of the ABS funding platform. Angle Auto aims to leverage Cerberus’s deep relationships across global capital markets and provide these investors with a steady stream of high-quality auto ABS that spans the entire capital stack.

Cost of living pressure is a major talking point. How does the economic environment affect Angle Auto’s prospects and loan origination strategy? Have arrears been affected?

We estimate there is at least two years worth of pent-up consumer demand for new vehicles. With high levels of employment, rising wages – albeit not at the same pace as inflation – and a cashed-up post-pandemic consumer, we anticipate new and used car sales will trend higher as supply increases. The economic landscape therefore supports Angle Auto’s growth prospects.

Further to this, with supply of new vehicles down over an extended period, vehicle resale prices are likely to remain elevated for some time before normalising. Even if the economy entered a shallow recession and defaults were to rise, losses are likely to remain at or even below the historical average.