Auto specialty finance firm Consumer Portfolio Services (CPS) is using a unique funding structure that is a hybrid of a warehouse facility and a term transaction.

The $50 million deal was structured by Cohen & Co. The thing that is different about this particular transaction is that it allows investors to buy into the warehouse facility up to a certain amount that will eventually be drawn down, said John McWilliams, a managing director at Cohen. The term of the deal is for the life of the loans backing it.

“It takes warehouse banks out of the picture,” McWilliams said. “This gives the investor a tradable security over the life of the loan while having the advantages of warehousing.” The market, he added, for these securities is “better than it has ever been and the borrowers are excellent.”

However, despite the advantages of this new form of financing, “I think it would be on a company by company basis whether this type of financing will be used, and for now does not yet have a broad application,” McWilliams said.

In late September last year, CPS announced that it had entered into a $50 million two-year credit facility with an affiliate of the Fortress Investment Group. The firm said at that time that the loans from the said facility were secured by automobile receivables that CPS held or was going to buy from dealers.

CPS is a specialty finance company that offers auto financing for new and used vehicle loans for consumers that have less than perfect credit. The firm, which has been serving clients  since 1991, purchases contracts in 44 states with more than 7,000 active auto dealers.

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