Non-prime auto loan contracts that American Credit Acceptance either originated or purchased will collateralize $513.1 million in asset-backed securities (ABS) coming to market from the American Credit Acceptance Receivables Trust, 2025-2.
American Credit has a lot of experience securitizing these types of loans, with this deal being their 51st, and that adds to the deal's credit strengths, according to Moody's Ratings. The deal, ACAR 2025-2, will issue notes through five tranches of A, B, C, D and E notes. While all tranches have a reserve fund totaling 1.00% of the note balance, their total initial hard credit enhancement levels vary.
Enhancement ranges from 63.35% on the class A notes to 15.80% on the class E notes, according to Moody's. Legal final maturity dates range from Sept. 12, 2028 on the class A notes.
BMO Capital Markets,
When the deal closes, the class A notes will benefit from overcollateralization of 14.80%, which will build to a targeted over-collateralization level. That level will be equal to the greater of 23.35% of the current pool balance and 2.50% of the original pool balance, the reserve fund of the original balance and 47.15% in subordinated notes.
Note principal payments will be made sequentially, so non-declining enhancement will grow as a percentage of remaining assets as the pool amortizes, Moody's said.
But there are several drawbacks, as Moody's said. Underlying loans only had a weighted average (WA) Vantage Score of 570, and that is even slightly lower than the WA 578 seen on the ACAR 2024-4 series. Also, the WA annual percentage rate, 24.58%, is in line with the 2024-4 series, Moody' said.
The deal also has a prefunding period that runs though July 31, 2025. Analysts expect ACAR to purchase about $113 million worth of additional receivables by then, representing 22% of the final pool. This addition could increase uncertainty to collateral characteristics and volatility to the portfolio's overall performance, Moody's said.
Moody's assigns Aaa to the A and B classes; and Aa2 and Baa2 to classes C and D. Asset Securitization Report notes that S&P Global Ratings assigned AAA to the class A notes; AA and A to classes B and C; and BBB and BB- to classes D and E. Kroll Bond Rating Agency assigns AAA to the class A notes; AA and A to classes B and C; and BBB and BB- to classes D and E.
