Carvana Auto Receivables Trust is preparing to launch a $478.7 million securitization of non-prime retail auto loan receivables. This makes the second Carvana deal of the year and the first transaction secured by non-prime assets.
The forthcoming transaction will also be the Carvana securitization program's seventh deal comprised almost entirely of non-prime automobile receivables, and, according to a pre-sale report from DBRS Morningstar. Bridgecrest Crest will service the loans, while Vervent will act as the backup servicer.
The deal has an April 15 collateral cutoff date, according to DBRS.
CRVNA 2023-N1 has a principal balance of $517 million, with an average current principal balance of $21,965, and the entire pool is comprised of loans on used vehicles, according to the Kroll Bond Rating Agency, which will also assign ratings to the notes.
The automobile loans are fixed rate, with a weighted average (WA) FICO score of 578. Aside from the industry's credit score, obligors have a proprietary Carvana Deal Score ranging from 0 to 49, according to KBRA. Also, the loans have a WA interest rate of 20.9%.
CRVNA 2023-N1 will issue notes out of five classes that benefit from overcollateralization, excess spread and subordination—except for the class E notes, KBRA said. Principal on the notes will be repaid sequentially, where the class A notes receive principal payments prior to all subordinate notes, and the trust will repay interest prior to all principal payments, the rating agency said.
Initially, the notes have an overcollateralization level of 7.40%, which will build to 11.20% of the current collateral balance. Further, the cash reserve account will be funded at closing and will equal approximately 1.25% of the initial collateral balance, the rating agency said. Excess spread of approximately 10.23% also confers benefits to the notes, KBRA said.
Elevated wholesale prices for used vehicles, on the rise since early 2021, expose the notes to the potential for lower recovery rates should pricing return to historical levels, KBRA said. Aside from that, the WA loan-to-value ratio on the CRVNA-N1 is 100.8%, higher than CRVNA 2022-N1, yet lower than CRVNA 2021-N4, according to KBRA.
Geographically the pool appears to be diversified, with Texas accounting for 13.7% of the pool; Florida, 7.8% and Pennsylvania 7.5%, according to DBRS.
KBRA says it intends to assign 'AAA' ratings to $245 million in class A notes, the bulk of the deal; 'AA+' on the class B notes; 'A+' to the class C notes; 'BBB+' to the class D notes and 'BB+' on the class E notes.
For its part, DBRS says its ratings will range from 'AAA' on the class A notes; 'AA' on the class B notes; 'A' on the class C notes; 'BBB' on the class D notes and 'BB' on the class E notes.
