Carvana Auto Receivables Trust is seeking to raise $168.22 million through CRVNA 2023-N2, collateralized by $181.27 million of U.S. automobile loans to primarily non-prime borrowers. The transaction is expected to close in the coming weeks, according to Kroll Bond Rating Agency (KBRA).
On the cut-off date of July 5, the loans had an average current principal balance of $22,934, weighted average interest rate of 21.93%, and weighted average original term and remaining term of 72 and 70 months, respectively, KBRA said. The weighted average non-zero FICO score was 573.
Carvana is an auto finance and retail company with an online component, KBRA says. It will use the net proceeds from the issuance of the notes to pay down existing debt and for general operating purposes.
Six classes of notes are being issued by this trust collateralized by that $181.27 million pool of used vehicle loans. The notes and pool amounts represent around 35% of those for
2023-N2's class A-1 and A-2 notes together account for 55% of the notes being issued. KBRA expects to assign a AAA rating to both classes. Class B has an expected rating of AA, class C a rating of A, class D a rating of BBB+, and class E a rating of BB+.
CRVNA 2023-N2 is Carvana's fourth asset-backed securitization for 2023, the eighth under its non-prime shelf, and the twenty-second overall. Looking back to CRVNA issues from 2019, the principal balance of loans and weighted average annual percentage rate has been rising steadily, while FICO scores have been dropping, KBRA says. Weighted average loan-to-value has also been rising, although no LTV was provided by KBRA.
According to KBRA, as of March 31, 2023 Carvana had $1.5 billion of cash and borrowing capacity for financing receivables in its vehicle inventory and warehouse facilities. It also had a committed inventory facility of $2 billion from Ally Bank available through March 22, 2024. In addition, Carvana had $2.5 billion in warehouse capacity from five different lenders with staggered maturities to finance its receivables.
Carvana also has about $2 billion of unencumbered real estate portfolio. In January 2023, Ally renewed a forward flow purchase agreement to purchase up to $4 billion of auto loans over the next year.
Carvana's loans are serviced by Bridgecrest, a wholly owned subsidiary of DriveTime Automotive Group, which services a $16 billion portfolio consisting of loans originated by Carvana and DriveTime. Vervent is the backup processor.
The issue's enhancements comprise excess spread, a cash reserve account, and senior/subordinate structure, according to the Asset Securitization Report deal database.
KBRA's analysis of the security indicated that available credit enhancement is sufficient to withstand the stress tests in the models it uses for assigning ratings to the various note classes.
