Credit Acceptance Announces Completion of $600.0 Million Asset-Backed Financing

Rhea-AI Summary

Credit Acceptance (Nasdaq: CACC) has completed a $600.0 million asset-backed non-recourse secured financing. The company conveyed loans valued at approximately $750.2 million to a special purpose entity, which will transfer them to a trust issuing three classes of notes. The financing will have an expected average annualized cost of about 5.2%, revolve for 24 months, and then amortize based on cash flows from the conveyed loans.

The funds will be used to repay outstanding indebtedness and for general corporate purposes. Credit Acceptance will receive 4.0% of cash flows to cover servicing expenses, while 96.0% (less dealer holdback payments) will go towards note principal, interest, and ongoing financing costs. This structure preserves dealers' rights to future holdback payments.

Positive

• Secured $600.0 million in asset-backed financing
• Expected average annualized cost of 5.2%, which may be competitive in current market conditions
• 24-month revolving period before amortization, providing flexibility
• Financing to be used for debt repayment and general corporate purposes, potentially improving financial position

Negative

• Conveyed loans valued at $750.2 million to secure $600.0 million financing, potentially indicating a discount
• New debt obligation could increase overall leverage and financial risk

News Market Reaction

+1.43%

1 alert

+1.43% News Effect

On the day this news was published, CACC gained 1.43%, reflecting a mild positive market reaction.

Data tracked by StockTitan Argus on the day of publication.

Southfield, Michigan, Sept. 26, 2024 (GLOBE NEWSWIRE) -- Credit Acceptance Corporation (Nasdaq: CACC) (the “Company”, “Credit Acceptance”, “we”, “our”, or “us”) announced today the completion of a $600.0 million asset-backed non-recourse secured financing (the “Financing”). Pursuant to this transaction, we conveyed loans having a value of approximately $750.2 million to a wholly owned special purpose entity which will transfer the loans to a trust, which will issue three classes of notes:

Note Class			Amount			Average Life			Price					Interest Rate
	A		$	316,464,000			2.45 years			99.98629	%				4.68	%
	B		$	121,668,000			3.08 years			99.97303	%				4.85	%
	C		$	161,868,000			3.53 years			99.98737	%				5.39	%

The Financing will:

• have an expected average annualized cost of approximately 5.2% including the initial purchasers’ fees and other costs;
• revolve for 24 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 on the notes 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.

The notes have not been and will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This news release does not and will not constitute an offer to sell or the solicitation of an offer to buy the notes. This news release is being issued pursuant to and in accordance with Rule 135c under the Securities Act of 1933.

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 is the total value of the asset-backed financing completed by Credit Acceptance (CACC)?

Credit Acceptance (CACC) completed a $600.0 million asset-backed non-recourse secured financing.

How will Credit Acceptance (CACC) use the proceeds from the $600 million financing?

Credit Acceptance (CACC) will use the financing to repay outstanding indebtedness and for general corporate purposes.

What is the expected average annualized cost of the financing for Credit Acceptance (CACC)?

The expected average annualized cost of the financing for Credit Acceptance (CACC) is approximately 5.2%, including initial purchasers' fees and other costs.

How long will the revolving period last for Credit Acceptance's (CACC) new financing?

The financing will revolve for 24 months before amortizing based on cash flows from the conveyed loans.