America's Car-Mart is returning to sponsor another securitization of subprime auto loan receivables, this time raising $360.3 million through two classes of notes instead of the four classes present on the previous deal.
The drastic cutback in the number of note classes, on ACM Auto Trust, 2023-2, isn't the only change from the previous deal, according to ratings analysts at S&P Global Markets. Total initial hard credit enhancement was 53.00% and 37.00% on classes A and B, down from 63.60% and 55.80% on the AMCAT 2023-1, S&P said.
Among other structural changes on the deal, initial overcollateralization increased to 35.00% of the pool balance, and S&P expects it to grow to a target of 37.20%. Subordination for class A decreased to 16.00%, from 28.30%, S&P said. At least one characteristic remained the same from the previous deal, however, a 2.00% reserve account, the rating agency said.
The Texas-based lender specializes in providing used car financing, with a more than 40-year track record in the subprime auto finance business, according to S&P. ACM's dealership locations are primarily in small communities throughout the Southern and Central U.S. regions, according to S&P. ACM tends to originate loans with shorter terms, typically 18 to 54 months and not exceeding 69 months, the rating agency said.
ACM's track record is considered one of its strengths, S&P said.
"It has successfully operated through various economic cycles including the Global Financial Crisis," the company said, "and with the exception of 2033, the company has remained profitable since 1996."
Aside from structural changes relative to the AMCAT 2023-1, the deal also saw some changes in the collateral. The percentage of loans in ACM's top customer score, 6, was 33.24%, a decrease from 35.17%. On a weighted average (WA) basis, the remaining term increased to 41.36 months, up from 38.65 months on AMCAT 2023-1. The deal's WA loan-to-value ratio was 113.83%, up from 112.72%.
On average, the loans in the pool had 3.88 months of seasoning, down from 5.96 months, according to the rating agency, while the principal amount financed was $16,991, an increase from $15,378.
The collateral exhibited another couple of characteristics, including the fact that loans that had ever been 60 days past due was 9.11%, a decrease from 17.88%, while the percentage of loans that were extended decreased to 19.64%, from 22.75%, according to the rating agency.
S&P plans to assign 'A' to the class A notes and 'BBB' to the class B notes.
