A pool of loans extended to used car buyers with subprime credit will collateralize the CarNow Auto Receivables Trust, 2023-1, a deal that will issue some $140.5 million in asset-backed securities (ABS).
Byrider Finance, both a seller and financer of vehicles to subprime borrowers, is sponsoring the deal, where Deutsche Bank Securities is the lead manager, according to Kroll Bond Rating Agency and the Asset Securitization Report database. Byrider Finance will also service the notes, according to KBRA.
In recent years Byrider has refined the Automated Risk Evaluator ("A.R.E.") its proprietary applicant qualification model, which considers several factors, including credit bureau data, information from the applicant, affordability, and alternative data to. The company rolled out the latest system, called A.R.E. 4.0, in Q4 2021, after noticing higher delinquencies and defaults in the 2021 vintage, according to KBRA. Now, the A.R.E. 4.0 scoring system has an increased minimum income level for all borrower tiers, a higher minimum down payment for lower quality credit tiers, and it raised the score cutoff to essentially eliminate Tier 1 and high-risk Tier 2 loans.
As for previous CNART transactions, delinquency rates have ranged between 8.10% on the CNART 2020-1 to 8.86% on the CNART 2021-2 deal, until delinquencies dropped to 8.82% on the CNART 2022-1, according to KBRA. Cumulative net losses, for the current period, were about 6.06% on the 2022-1 deal.
Otherwise, Byrider has tightened up certain areas of its core business, and some changes have yielded positive results. In November 2022, Byrider reduced the number of company stores to 17, from 32, after closing 10 stores and transferring five to franchisees. Through November 2022, KBRA notes, total revenue was $378.2 million, up 9.7% compared with the same period in 2021. Originations, in particular, were about $298.6 million, representing a 5% increase compared with 2021.
Subordination, overcollateralization, a reserve account and excess spread provide credit enhancement.
KBRA expects to assign ratings ranging from 'AAA' to the $48.9 million, class A certificate, to 'BB-' on the $24.3 million, class E certificates.
