Pentagon FCU Closes Inaugural Prime Auto Loan Securitization

Pentagon FCU, or PenFed Credit Union, closed its inaugural prime auto loan securitization, PenFed Auto Receivables Owner Trust 2022-A.

Under the transaction, $460.3 million of fixed-rate, amortizing notes backed by prime auto loans were issued. The notes were offered in four senior and three subordinate tranches of notes. Like other types of loans, including student loans and credit card receivables, auto loans can be packaged into securities and sold to investors. These “asset-backed securities,” or ABS, provide the lender with the cash (and an additional incentive) to make more loans.