The American Credit Acceptance Receivables Trust 2023-4 is preparing to issue $435.8 million in asset-backed securities, in a deal where the pool of non-prime retail installment loan contracts on autos with improved credit quality over a previous deal.
Wells Fargo Securities is lead manager of the deal, which will issue notes from up to five classes of notes, according to the Asset Securitization Report's deal database. Classes A and B have total initial hard credit enhancement of 64.00% and 54.80%, respectively, according to a pre-sale report from Moody's Advisors Service. Meanwhile, classes C and D have initial hard credit enhancement levels of 40.80% and 25.80%, respectively.
Moody's says it expects a cumulative net loss (CNL) of 30.00% across the deal, while losses at a triple-A stress level is 60.00%.
Sponsor American Credit Acceptance comes to the securitization market frequently, and as a lender it has a total non-prime serviced portfolio of about $4.3 billion as of September 2023, Moody's said. That works out to be a credit strength, Moody's said.
As for the pool's improved credit quality, Moody's said, the ACAR 2023-4 pool has a weighted average (WA), non-zero FICO score of 551, noticeably higher than the 535 FICO score of 2023-2. The WA loan-to-value 112% is marginally higher than the 111% of the 2023-2 pool. Still, the LTV was lower than prior ACAR pools going back to 2020-3. Going back that far, LTV levels ranged from 115% to 119%, according to Moody's.
Auto ABS is a staple sector in the securitization business, and business has picked up in recent months. ACAR 2023-4 comes to market after issuance exceeded second-quarter volumes by about 31.69%, according to a tally from ASR's deal database.
Kroll Bond Rating Agency, which will also rate the notes, says the transaction structure works in the deal's favor. ACAR 2023-4 will follow a sequential pay structure, where the class A notes receive principal payments before the subordinate notes. Overcollateralization (18.25%), a 1.00% cash reserve account and 12.79% in excess spread also support the timely repayments of notes.
KBRA intends to assign ratings of 'AAA' to the class A notes; 'AA' to the class B notes; 'A' to the class C notes; and 'BBB-' to the class D notes. Moody's says it intends to assign 'Aaa' to the classes A and B notes; 'Aa2' to the class C notes and 'Baa3' to the class D notes.
Neither rating agency assigned ratings to the class E notes. The notes have legal final maturity dates ranging from June 14, 2027 through Aug. 12, 2031.
