Credit Acceptance and Consumer Portfolio Services each pushed out securitizations recently, and the combined total offered by the auto finance companies that specialize in subprime paper reached nearly $550 million.
The larger of the two developments was from Credit Acceptance, which on Thursday announced the completion of a $350.0 million asset-backed non-recourse secured financing. Pursuant to this transaction, the company contributed vehicle installment contracts having a net book value of approximately $437.6 million to a wholly-owned special purpose entity, which will transfer the paper to a trust. The result was the issuance of three classes of notes:
|Note Class||Amount||Average Life||Price||Interest Rate|
Credit Acceptance indicated the securitization will accomplish three objectives, including:
—Have an expected annualized cost of approximately 3.2 percent including the initial purchaser’s fees and other costs
—Revolve for 24 months, after which it will amortize based upon the cash flows on the contributed loans
—Be used by the company to repay outstanding indebtedness
“We will receive 6.0 percent of the cash flows related to the underlying consumer loans to cover servicing expenses,” company officials said. “The remaining 94.0 percent, less amounts due to dealers for payments of dealer holdback, will be used to pay principal and interest on the notes as well as the ongoing costs of the financing.
“The financing is structured so as not to affect our contractual relationships with our dealers and to preserve the dealers’ rights to future payments of dealer holdback,” they added.
Meanwhile over at CPS, the company announced the closing of its fourth term securitization in 2017 earlier this month. The transaction is CPS’ 26th senior subordinate securitization since the beginning of 2011 and the ninth consecutive securitization to receive a triple “A” rating on the senior class of notes from at least two rating agencies.
In the transaction, CPS highlighted that qualified institutional buyers purchased $196.3 million of asset-backed notes secured by $200.0 million in automobile receivables originated by CPS. The sold notes, issued by CPS Auto Receivables Trust 2017-D, consist of five classes.
Officials indicated ratings of the notes were provided by Standard & Poor’s and Kroll Bond Rating Agency, and were based on the structure of the transaction, the historical performance of similar receivables and CPS’s experience as a servicer.
|Note Class||Amount||Interest Rate||Average Life||Price||S&P Rating||KBRA Rating|
|A||$91.4 million||1.87%||.75 years||99.99875%||AAA||AAA|
|B||$32.5 million||2.43%||1.95 years||99.99125%||AA||AA|
|C||$27.9 million||3.01%||2.65 years||99.97725%||A||A|
|D||$23.8 million||3.73%||3.48 years||99.98753%||BBB||BBB|
|E||$20.7 million||5.30%||4.13 years||99.97785%||BB-||BB-|
CPS mentioned the weighted average coupon on the notes is approximately 3.39 percent.
The company also noted the 2017-D transaction has initial credit enhancement consisting of a cash deposit equal to 1.00 percent of the original receivable pool balance and over-collateralization of 1.85 percent. The final enhancement level requires accelerated payment of principal on the notes to reach overcollateralization of the lessor of 6.80 percent of the original receivable pool balance, or 18.50 percent of the then outstanding pool balance.
CPS went on to say the transaction utilizes a pre-funding structure, in which CPS sold approximately $133.4 million of receivables today and plans to sell approximately $66.6 million of additional receivables during October.
“This further sale is intended to provide CPS with long-term financing for receivables purchased primarily in the month of October,” officials said.
Editor’s note: Watch for upcoming reports as the executive teams from both Credit Acceptance and CPS discuss company results from the third quarter.