American Credit Acceptance, the subprime auto finance company, is sponsoring another securitization of retail auto contracts secured by new and used automobiles and motorcycles, in a deal that will not include any prefunded collateral in the underlying pool, a change from the previous deal.
The deal comes to market as Kroll Bond Rating Agency noted that recent pool vintages are showing a decline in month-over-month recoveries, and current recovery performance is slightly below historical platform averages. In terms of the credit mix, however, the pool balance has a 50-50 split between tier 1 and tier 2 loans. Further, the pool mix includes 20% of called collateral—generally a better performer than newly originated loans—an increase from 17.5% from the ACAR 2024-1, KBRA said.
The transaction, American Credit Acceptance Receivables Trust, series 2024-2, will sell bonds to investors through five tranches of classes A, B, C, D and E notes, according to ratings analysts from KBRA and Moody's Investors Service.
BMO Capital Markets, Citigroup Global Markets and Wells Fargo Securities are the managers on the deal, according to the Asset Securitization Report's deal database,
The notes benefit from several forms of credit enhancement, including excess spread. Yet that form of protection, 14.07%, is slightly lower than the 14.13% on the ACAR 2024-1 transaction, according to analysts at KBRA.
Moody's says the notes also benefit from a reserve fund representing 1.00% of the pool balance.
Classes A and B have the same legal final maturity date, on Feb. 12, 2027 and Dec. 13, 2027, respectively, while classes C and D will mature on the same date, April 12, 2030 they said. The class E notes, meanwhile, has a Nov. 12, 2031 legal final maturity date.
The deal is slated to close this week, and the notes are benchmarked on the three-month I-curve, according to ASR's deal database. Pricing guidance ranges from the three-month, I-curve plus 60 basis points on the AAA-rated notes to 185 bps over the benchmark on the BBB notes, according to ASR's database.
Moody's raised some concerns about the ACA as a servicer, as well as the collateral's weak credit quality. On a weighted average (WA) basis, the loans have a FICO score of 541, noticeably lower than the 551 seen on the 2023-4 deal. Also on a WA basis, the loans, which are financing virtually all used cars (98%), have a loan-to-value (LTV) ratio of 116%, slightly higher than the 112% seen on the 2023-4 pool, Moody's said.
Moody's will assign Aaa ratings to the classes A and B notes; Aa2 to the class C, and Baa3 to the class D notes.
KBRA assigns AAA to the class A notes; AA to the class B notes; A to the class C notes; BBB to the class D notes and BB to the class E notes.
