Subprime auto finance company American Credit Acceptance (ACA) is launching its second asset-backed security of 2022.
American Credit Acceptance Receivables Trust 2022-2 will issue six classes of notes totaling $425 million, collateralized by a pool of retail automobile contracts made to subprime borrowers and secured by new and used autos and motorcycles, according to an April 18 presale report from Kroll Bond Rating Agency.
ACAR 2022-2 has a $197.73 million tranche that’s rated ‘AAA’ by KBRA; a $42.05 million tranche rated ‘AA’; a $75 million tranche rated ‘A’; a $53.86 million tranche rated ‘BBB’; a $41.82 million tranche rated ‘BB’; and a $14.54 million tranche rated ‘B.’ The closing date is April 29.
ACAR 2022-2 will utilize a sequential pay structure where the Class ‘A’ notes receive principal payments prior to all subordinate notes, according to the report. Once Class ‘A’ is paid off, Classes ‘B,’ ‘C,’ ‘D,’ ‘E,’ and then ‘F’ will receive principal payments, KBRA wrote.
Analytical contacts on KBRA’s presale report are Rahel Avigdor, senior director; Brockton Bowers, analyst; Eric Neglia, senior managing director; and Sandy Azer, director.
The owner trustee is Wilmington Trust, N.A., and American Credit Acceptance, LLC, is the sponsor.
ACA focuses on subprime borrowers with an average FICO score up to the mid-500s. The company’s track record in servicing subprime borrowers is solid, and the company benefits from multiple “origination channels so it can shift among those channels depending on market conditions,” KBRA said.
Since its first securitization in 2011, ACA has issued 37 more, totaling about $10.8 billion, according to the presale report. Thirteen ACAR ratings have outstanding ratings, KBRA noted.
ACA has been profitable since 2009, and its management team has an average of more than 16 years of experience in the nonprime auto finance sector.
The company has originated loans under its current management team since 2007, the report said. It is majority-owned by George Johnson Jr., who “has a track record of building and scaling businesses, including WJB Video, Extended Stay America and Advance America Cash Advance,” the report said. ACA is headquartered in Spartanburg, South Carolina.
Within ACAR 2022-2, the excess spread is approximately 15.67%, according to the KBRA report.
There are a few differences from the previous trust, which closed on Jan. 27. ACAR 2022-2’s expected gross excess spread is 2.13% lower than ACAR 2022-1. Also, ACAR 2022-2 has 3.8% of called collateral compared to less than 1% in ACAR 2022-1.
One concern for KBRA analysts is that COVID-19 pandemic shutdowns caused auto production delays and subsequent price inflation in the used-vehicle market. KBRA cautioned that if used-car pricing returns to normalized levels, there is the potential for lower recovery rates on defaulted collateral.
