Arivo Acceptance is returning for a third asset-backed securities (ABS) deal, with the Arivo Acceptance Auto Loan Receivables Trust, 2022-1, a $201 million securitization of subprime auto loan contracts on new and used automobiles, light-duty trucks and vans.
The deal is being structured as a Rule 144A deal and uses a senior-subordinate capital structure, according to a pre-sale report from DBRS | Morningstar. Each of the four classes benefits from initial credit enhancement, cash collateral accounts and overcollateralization.
In other forms of credit support, the pool’s initial overcollateralization (OC) will be 4.5% of the initial pool balance. The OC is expected to build up to a target of 13.7% of the current pool balance, with a floor of 1.0%, DBRS said.
DBRS expects to assign ratings of ‘AA’ on the $159 million class A certificates, ‘A’ on the $13.7 million class Bs; and them ‘BB’ and ‘B’ on classes C and D, respectively.
Arivo Acceptance Auto Loan, 2022-1, has a collateral pool with 6.922 loans, most of which, 85.8%, are used. Also, the collateral has an average loan balance of $24,112, DBRS said. The loans have a remaining term of 65 months, and an APR of 15.7%.
The collateral pool has a non-zero FICO 8 score of 560, the rating agency said.
Founded in 2017, Arivo is a privately held specialty finance company that originates its loans indirectly through contracted franchise and independent dealers. The company launched its business model using a conservative scorecard that emphasized high monthly income. Eventually, in early 2021, the company implemented the third generation of its Risk and Pricing Models, based on its accumulations of loan data and market intelligence.
The rating agency also noted that the transaction has a prefunding account that amounts to about 17.1% of the expected aggregate pool balance. Prefunding is expected to begin again on April 13, the expected closing date, and extend through a date no later than June 30, 2022.
Most of the loans, classes A through C, have a legal final maturity date of May through July 2028. The class D notes have a legal final maturity of September 17, 2029.
