Tricolor on Tuesday priced a US$328.1m subprime auto securitization without a social bond label, its first pricing without that ESG designation since the car lender issued its inaugural deal in the format in 2022.
The Texas-based company's removal of the social label came at a challenging time for the ESG market in general as US president Donald Trump is seeking to eliminate diversity efforts in the federal government and withhold contracts from companies and funding from universities with DEI programs.
The fintech firm, which focuses on lending to low-income Hispanic borrowers with little or no credit history, had been one of few nongovernment issuers of social bonds in the structured finance market. All in all, it issued five social bonds between 2022 and 2024, raising a combined US$1.27bn, IFR data show.
A company spokesman said the latest deal, Tricolor Auto Securitization Trust 2025-1, is a not social bond but did not elaborate on the reason for dropping the ESG label. JP Morgan and Barclays were the joint bookrunners.
Even without the social label, this week's subprime offering "went well and saw strong demand despite the challenging market backdrop," a person familiar with the deal said, referring to the volatile credit market conditions spurred by anxiety about a trade war between the United States and its major trading partners.
Tricolor's 16th asset-backed deal was placed with "a diversified mix of institutional investors", the company said in a statement today.
The US$228.08m Triple A rated note with a weighted-average life of 0.91 year came in at US Treasuries plus 95bp. The spread was tighter than the plus 100bp on a similar tranche in its previous deal, Tricolor Auto Securitization Trust 2024-3, sold last October, which was a social bond.
Some of the proceeds from the securitization will be used to repay outstanding debt on a warehouse line in order to free up additional borrowing capacity, Kroll said in a presale report.