Credit Acceptance Corporation is coming down the pike with a $140 million securitization of subprime auto loans, according to a presale from Kroll Bond Ratings. Wells Fargo is arranging the deal, Credit Acceptance’s first of 2013.
Slated to close April 25, 2013, the transaction is split into two tranches. A $118 million piece with a legal final maturity of 7.5 years scored ‘AAA(sf)’, while a $22.3 million slice with an 8-year legal final got ‘AA(sf).’
The deal is backed by $451 million in loans, with 88.15% in dealer loans and 11.85% in purchased loans. Among the dealer loans, the largest state is Minnesota, accounting for 13.79% of the total.
The company has been growing quickly over the past few years, although at a slower pace most recently, Kroll said. The number of active dealers increased 65.9% from 3,206 in 2010 to 5,319 in 2012. Originations rose 6.7% in 2012, after a galloping 23.2% increase in 2011.
Kroll said that Credit Acceptance’s approach is unusual among sub-prime lenders. “The basis for this model is Credit Acceptance’s ‘Portfolio Program’ which it created to allow dealers to obtain financing for customers that were not eligible for financing through traditional financial institutions,” the agency said. “As a result its underlying consumer obligors are generally even less creditworthy than that of most traditional auto lenders.”
But Credit Acceptance has a way of splitting the funding and returns with dealers that has a long, successful track record.