Credit Acceptance Announces Completion of $550.0 Million Asset-Backed Financing
Credit Acceptance (Nasdaq: CACC) has completed a $550 million asset-backed non-recourse secured financing. The company conveyed approximately $687.7 million in loans to a special purpose entity, which transferred the loans to a trust. The trust will issue three classes of notes with different amounts, average lives, and interest rates: Class A ($272.44 million, 2.5 years, 5.95%), Class B ($110.29 million, 3.16 years, 6.11%), and Class C ($167.27 million, 3.67 years, 6.70%).
The financing has an expected average annualized cost of 6.5% and will revolve for 24 months before amortizing based on cash flows from the conveyed loans. Proceeds will be used to repay existing debt and for general corporate purposes. Credit Acceptance will receive 4% of the cash flows to cover servicing expenses, while the remaining 96%, after dealer holdback payments, will cover principal, interest, and ongoing financing costs. The financing preserves dealers' contractual rights and holdback payments.
- Successful completion of $550 million financing.
- Loans valued at approximately $687.7 million were conveyed.
- Financing will be used to repay outstanding debt and for general corporate purposes.
- Company will receive 4% of cash flows to cover servicing expenses.
- Expected average annualized cost of financing is approximately 6.5%.
- Notes will not be registered under the Securities Act of 1933.
Insights
Credit Acceptance Corporation's completion of a
- Class A:
$272.44 million , 2.50 years, 5.95% - Class B:
$110.29 million , 3.16 years, 6.11% - Class C:
$167.27 million , 3.67 years, 6.70%
This financing is expected to have an average annualized cost of around
From an investor's perspective, the non-recourse nature of the financing reduces the risk by limiting the repayment obligations to the cash flows from the conveyed loans. The structured deal preserves dealer relationships and their rights to future payments, which is important for maintaining a steady flow of business and customer satisfaction.
Overall, this financing move appears to be a prudent strategy for managing debt and ensuring liquidity, though the relatively high interest rates could squeeze margins slightly in the short term.
For retail investors, understanding how this financing impacts Credit Acceptance's market positioning is key. By securing a
The issued notes have interest rates ranging from
Furthermore, the company's focus on using the proceeds to repay existing debt and for general corporate purposes suggests a proactive approach to balance sheet management and growth optimization. For the long term, maintaining positive relationships with dealers by preserving their rights to dealer holdback payments is a positive move, ensuring a steady sales pipeline and repeat business.
This financing indicates Credit Acceptance's strong market presence and ability to maintain operational fluidity, making it a noteworthy development for current and prospective investors.
Southfield, Michigan, June 20, 2024 (GLOBE NEWSWIRE) -- Credit Acceptance Corporation (Nasdaq: CACC) (the “Company”, “Credit Acceptance”, “we”, “our”, or “us”) announced today the completion of a
| Note Class | Amount | Average Life | Price | Interest Rate | |||||||||||||
| A | $ | 272,440,000 | 2.50 years | 99.99846 | % | 5.95 | % | ||||||||||
| B | $ | 110,290,000 | 3.16 years | 99.97870 | % | 6.11 | % | ||||||||||
| C | $ | 167,270,000 | 3.67 years | 99.97885 | % | 6.70 | % | ||||||||||
The Financing will:
- have an expected average annualized cost of approximately
6.5% 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
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 amount of the asset-backed financing completed by Credit Acceptance (CACC)?
What is the average annualized cost of the financing completed by Credit Acceptance (CACC)?
How will Credit Acceptance (CACC) use the proceeds from the $550 million financing?
What are the interest rates for the notes issued by Credit Acceptance (CACC) in the recent financing?
What is the value of the loans conveyed by Credit Acceptance (CACC) in the financing transaction?
