Credit Acceptance Announces Completion of $300.0 Million Asset-Backed Financing

Rhea-AI Summary

Credit Acceptance (CACC) has completed a $300.0 million asset-backed non-recourse secured financing. The company conveyed loans valued at approximately $375.1 million to a special purpose entity, issuing three classes of notes with interest rates ranging from 5.79% to 6.67%. The financing will have an expected average annualized cost of about 6.3%, including fees.

The financing structure includes a 36-month revolving period followed by amortization based on conveyed loan cash flows. CACC will retain 4.0% of cash flows for servicing expenses, while 96.0% will be used for principal and interest payments to lenders and ongoing financing costs, after dealer holdback payments. The arrangement preserves dealer relationships and holdback payment rights.

Positive

• Secured $300 million in new financing
• Maintains 4% servicing fee revenue stream
• 36-month revolving period provides operational flexibility
• Preserves existing dealer relationships and payment structures

Negative

• 6.3% average cost of financing indicates relatively high borrowing costs
• Company required to pledge $375.1M in loans to secure $300M financing

News Market Reaction – CACC

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Southfield, Michigan, Dec. 20, 2024 (GLOBE NEWSWIRE) -- Credit Acceptance Corporation (Nasdaq: CACC) (the “Company”, “Credit Acceptance”, “we”, “our”, or “us”) announced today the completion of a $300.0 million asset-backed non-recourse secured financing (the “Financing”). Pursuant to this transaction, we conveyed loans having a value of approximately $375.1 million to a wholly owned special purpose entity that will pledge the loans to institutional lenders under a loan and security agreement. We will issue three classes of notes:

Note Class			Amount			Interest Rate
	A		$	139,220,000			5.79	%
	B		$	62,180,000			6.03	%
	C		$	98,600,000			6.67	%

The Financing will:

• have an expected average annualized cost of approximately 6.3% including upfront fees and other costs;
• revolve for 36 months after which it will amortize based upon the cash flows on the conveyed loans; and
• be used by us to repay outstanding indebtedness and for general corporate purposes.
  
  

We will receive 4.0% of the cash flows related to the underlying consumer loans to cover servicing expenses. The remaining 96.0%, less amounts due to dealers for payments of dealer holdback, will be used to pay principal and interest to the institutional lenders as well as the ongoing costs of the Financing. The Financing is structured so as not to affect our contractual relationships with dealers and to preserve the dealers’ rights to future payments of dealer holdback.

Description of Credit Acceptance Corporation

We make vehicle ownership possible by providing innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history. Our financing programs are offered through a nationwide network of automobile dealers who benefit from sales of vehicles to consumers who otherwise could not obtain financing; from repeat and referral sales generated by these same customers; and from sales to customers responding to advertisements for our financing programs, but who actually end up qualifying for traditional financing.

Without our financing programs, consumers are often unable to purchase vehicles or they purchase unreliable ones. Further, as we report to the three national credit reporting agencies, an important ancillary benefit of our programs is that we provide consumers with an opportunity to improve their lives by improving their credit score and move on to more traditional sources of financing. Credit Acceptance is publicly traded on the Nasdaq Stock Market under the symbol CACC. For more information, visit creditacceptance.com.

FAQ

What are the interest rates for CACC's new $300M asset-backed financing?

The financing includes three note classes with interest rates of 5.79% for Class A ($139.22M), 6.03% for Class B ($62.18M), and 6.67% for Class C ($98.6M).

How will CACC use the proceeds from the $300M financing?

The financing will be used to repay outstanding indebtedness and for general corporate purposes.

What is the cash flow distribution structure in CACC's new financing?

CACC receives 4.0% of cash flows for servicing expenses, while 96.0% goes toward principal and interest payments to lenders and financing costs, after dealer holdback payments.

How long is the revolving period for CACC's new $300M financing?

The financing has a 36-month revolving period, after which it will amortize based on the cash flows from the conveyed loans.