Credit Acceptance Corporation (NASDAQ: CACC) has just announced the completion of a $550.0 million asset-backed non-recourse secured financing. This transaction involved conveying loans with a value of approximately $687.7 million to a special purpose entity, which then transferred the loans to a trust that issued three classes of notes.
The three classes of notes issued are as follows: Note Class A: $272,440,000 with an average life of 2.50 years, a price of 99.99846%, and an interest rate of 5.95% Note Class B: $110,290,000 with an average life of 3.16 years, a price of 99.97870%, and an interest rate of 6.11% * Note Class C: $167,270,000 with an average life of 3.67 years, a price of 99.97885%, and an interest rate of 6.70%
The financing is expected to have an average annualized cost of approximately 6.5%, including the initial purchasers' fees and other costs. It will revolve for 24 months and then amortize based on the cash flows from the conveyed loans. The purpose of the financing is to repay outstanding indebtedness and for general corporate purposes.
Notably, Credit Acceptance 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. Importantly, the financing is structured to not affect the company's contractual relationships with dealers and to preserve the dealers' rights to future payments of dealer holdback.
It's worth noting that the notes have not been 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.
Credit Acceptance Corporation, which provides innovative financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history, is publicly traded on the NASDAQ stock market under the symbol CACC. As a result of these announcements, the company's shares have moved 1.4% on the market, and are now trading at a price of $497.0. Check out the company's full 8-K submission here.
