Carvana Auto Receivables Trust is coming to market to float $243.5 million in notes backed by a pool of fixed-rate automobile installment loans extended to prime borrowers.
Investors will be repaid through a senior-subordinate structure, according to ratings analysts fro S&P Global Markets and Kroll Bond Rating Agency. All of the notes are fixed rate, and have legal final maturities that range from Oct. 10, 2024 through Oct. 10, 2030.
The notes benefit from slightly higher levels of total initial credit enhancement, except for the class B notes, where total initial credit enhancement dropped by 0.45% to 4.40%, according to KBRA analysts. CRVNA 2023-P4 also has a reserve account equaling 0.50% of the pool balance and annual excess spread of 5.66%. While initial overcollateralization was zero percent at the outset, KBRA notes, it can build to a target of 0.35% during the life of the deal.
CRVNA 2023-P4's pool characteristics have similar characteristics to the previous issuance. For one, the $24,228 average loan balance is just slightly higher than the $24,323 on the CRVNA 2023-P3. Otherwise, and on a weighted average (WA) basis the collateral has an average coupon of 13.11%, a non-zero FICO score of 704, a loan-to-value ratio of 93.64%, and an original term of 72 months.
S&P noted that subordination increased for the class A and class C notes, to 7.04% and 2.10%, respectively, from 7.00% and 1.50%. Meanwhile subordination decreased on the class B notes to 3.80%, from 4.25%.
Carvana uses a proprietary scoring model to qualify borrowers, and according to the score distribution throughout the CRVNA 2023-P4 collateral, the percentages of loans in the highest and lowest scoring brackets—50-59 points and 90-100 points, respectively—both increased. Loans in the middle three distribution ranges dropped, KBRA said.
S&P expects to assign ratings of 'A-1+' to the A1 notes; 'AAA' to the A2 through A4 notes; 'AA' to the class B notes; 'A+' to the class C notes; 'BBB+' to the class D notes and 'BB+' to class N notes. KBRA meanwhile, assigns 'K1+' to the A1 notes 'AAA' to classes A2 through A4; 'AA+' to the class B notes; 'A+' to the class C notes; 'BBB+' to class D notes and 'BBB' to the class N notes.
