US Car-Mart heads to market with blue chip ABS securitization
America’s Car-Mart Auto Trust 2022-1 (ACMAT 2022-1) is preparing a $400 million securitization of a pool of fixed rate installment loans issued to subprime used vehicle borrowers.
ACMAT 2022-1 is the first rated asset-backed security (ABS) sponsored by Rogers, Arkansas-based America’s Car Mart, Inc., according to rating agency Kroll Bond. The Trust will issue four classes of Notes.
KBRA Plans to Assign “AA-” Ratings to $236 Million Class A Notes; ‘A-‘ on $52 million Class B notes; “BBB-” on the $74.57 million class “C” notes and “BB-” on the $37.43 million class “D” notes, wrote analysts, Romil Chouhan, Eric Neglia , Michael Espino and Junoh Lee.
Colonial Auto Finance, Inc. is the seller. BNY Mellon Trust of Delaware is the proprietary trustee. America’s Car Mart, Inc. and Texas Car-Mart, Inc. are the initiators. Car-Mart’s management team has been in the subprime auto finance business for more than 40 years and its senior management has an average of 20 years of experience with Car-Mart, KBRA said. Wilmington Trust, NA is the deed trustee, backup server and calculating agent, according to a KBRA pre-sale report released April 13.
The pool’s weighted average FICO score is 553 and the loans have an average principal balance of $11,167, KBRA said. The cars are used and have a weighted average remaining life of 32 months. Their initial weighted average duration was 41 months.
As of February 28, ACMAT 2022-1 had $571.4 million in receivables. The weighted average loan to value ratio is 111.11% and the weighted average maturity period is nine months.
The expected closing date is April 27. The legal expiry date is April 20, 2029.
Car-Mart’s ability to generate net income and a cash position is “viewed favourably” by the rating agency. KBRA noted that Car-Mart has “access to a $600 million revolving credit facility (with a $100 million expansion option) provided by nine financial institutions that matures in September 2024.”
One downside is that rising interest rates — the highest in 40 years in the U.S. — may hurt consumer confidence and leave borrowers with less discretionary income to pay their debts. due to subsequent inflation.
Also, the majority of auto loans come from the South Central region of the United States. Most borrowers live in Arkansas, Oklahoma and Missouri, a concern in the event of natural disasters, regional recession or public health concerns such as the coronavirus outbreak, KBRA wrote.
KBRA applied its Global Structured Finance Counterparty Methodology, Global ESG Rating Methodology and Global ABS Rating Methodology for Automotive Loans as part of its analysis.