American Credit Acceptance, an auto loan lender that focuses deep subprime borrowers, is marketing a $219.3 million securitization.

American Credit Acceptance Receivables Trust 2015-1, the issuers first deal of 2015, is backed by a pool of loan receivables that in some cases don’t even have a FICO credit score. According to Kroll Bond Rating Agency’s presale report, the pool has a heavy concentration of lower quality subprime obligors with an average FICO score in the low to mid 500s. And 13.85% of the loans in the transaction have no FICO score.

“ACA’s obligors typically have limited financial means and have either a negative or nonexistent credit history,” the presale states.

The average balance of loans in the pool is $12,662. The average loan-to-value ratio is 129.6% and the average nterest rate is 23.8% over a weighted average term of 5.2 years.  Most of the loans (98% of the pool) are used to finance used vehicle purchases.

Both Kroll and Standard & Poor’s have assigned preliminary rating of ‘AA’ to $130 million of class A notes, due August 12, 2019 that benefit from credit enhancement at 51%. The $40.8 million of class B notes due Feb. 12, 2021 will be rated ‘A’. These notes have credit enhancement at 35%.

There are also $35.7 million of class C notes due April 12, 2021 rated ‘BBB’ with credit enhancement at 21%; and $12.7 million of class D notes due May 12, 2022, rated ‘BB’ with enhancement at 16%.

ACA is a relatively newer player in the subprime space. The company completed its first securitization in October 2011; since then it has issued nine additional transactions totaling approximately $1.91 billion.  

However the company has been originating loans since 2007, when George Johnson, the majority owner, acquired Cornerstone Acceptance Corporation from Sonic Automotive Inc. Cornerstone had been in the subprime auto finance business since 1989 and was Sonic’s in-house finance company prior to the acquisition.  

The company originates loans under two programs: Tier 1 Strategic loans are from CarMax customers who are ineligible for financing through CarMax’s captive finance company and Tier 2 Strategic loans are purchased from certain large dealer groups. Tier 1 and Tier 2 loans make up 37.8% and 28.9% , respectively, of the transaction’s pool.

Wells Fargo Securities and Deutsche Bank Securities are the lead managers on the deal.

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