EVs go mainstream

I've, the main one that I've done my weekly on has been this, uh, Avance deal, uh, which is, you know, is a very interesting deal.

It's the, the first fully battery el- electric vehicle auto leaseback securitization, which is...

I mean, it's kind of interesting that it's, you know, we're only sort of seeing that in 2026, but that, that also equally, I think, makes sense when you think about, you know, it's quite hard to get a fully BEV portfolio.

So, um, but yeah, that, that's, uh, that's been a really interesting deal that I've been looking at.

Okay.

So yeah, go on then.

Tell us a bit, a bit about the story and, and I mean, I don't know, are EVs more difficult to securitize than, than other types of cars? How-

Yeah

... how have people found that?

I think they are.

I mean, it's kind of always interesting whenever you're doing an auto ABS story, 'cause it's, I think it's sort of thought of as one of the, the kind of, you know, blander markets of all deals are, are kind of, you know, a bit samey.

Uh, but this I'd say is, you know, is quite different.

I mean, I think the, the main thing that really sort of differentiates it from other diesel or petrol-powered, you know, backed deals would be, you know, how you, you kind of analyze the residual, uh, value risk at looking at these.

'Cause it, you know, residual value risk is, uh, typically more volatile when you look at EV-backed deals.

So I mean, you know, just to explain what residual value risk is, it's, it's the risk that the asset is gonna be worth less than you kind of expected it when, uh, a lease term ends and the vehicle goes back to the lender, and then the lender sells it to recover its remaining value.

And that obviously can create problems if, you know, it's significantly lower than you were expecting because, you know, the, the cash flows won't be strong enough or you, you won't have a, a strong enough level unless there's, you know, a really good level of credit enhancements, you know, within the deal.

Um, so that's one of the, the kind of interesting things, uh, when you look at these deals.

What, in terms of the deal itself, like in terms of the size and the levels, how, how did that bear out?

Yeah.

So I mean, you, you've got, you know, the, the senior notes which account for, uh, 77.5% of the deal size and then, uh, you're getting most of the credit enhancement through a subordinated loan, which, uh, accounts for 22.5%.

So yeah, it, it's kind of, I think it's quite an interesting structure and, you know, it's got three rating agencies on the deal.

Seniors are all rated triple A, so that's, you know, obviously helps and, you know, it's also structured as a green bond, which is something that you don't really see in securitization, you know, outside of...

I mean, you see it a bit in the, the Dutch prime ABS market.

You've got like the Green Lion or Green Storm programs, and also the, the data center ones lend themselves a bit to it in terms of how they're able to do, you know, like water management and in terms of, you know, if they're, they're able to construct a deal where they can say it's, it's, you know, not gonna be wasteful or in terms of those-

Mm