Credit Acceptance Announces Increase and Extension of Revolving Secured Warehouse Facility and Extension of $500.0 Million Asset-Backed Financing

Rhea-AI Summary

Credit Acceptance (Nasdaq: CACC) has announced two significant financial updates:

1. Warehouse Facility II: The revolving secured warehouse facility has been increased from $400.0 million to $500.0 million. Its revolving period has been extended from April 30, 2026, to September 20, 2027. The interest rate on borrowings has decreased from SOFR plus 230 basis points to SOFR plus 185 basis points.

2. Term ABS 2019-2: The $500.0 million asset-backed non-recourse secured financing has been extended. Its revolving period now ends on September 15, 2026, instead of August 15, 2025. The interest rate has increased from 5.15% to 5.43%.

As of September 19, 2024, the company had $201.0 million outstanding under Warehouse Facility II.

Positive

• Increased Warehouse Facility II from $400.0 million to $500.0 million
• Extended revolving period of Warehouse Facility II by 17 months
• Decreased interest rate on Warehouse Facility II borrowings by 45 basis points
• Extended Term ABS 2019-2 financing revolving period by 13 months

Negative

• Increased interest rate on Term ABS 2019-2 financing from 5.15% to 5.43%

Insights

Financial Analyst

Credit Acceptance's facility expansion and extension signify improved liquidity and financial flexibility. The increase from $400 million to $500 million in Warehouse Facility II, coupled with a 45 basis point reduction in interest rate, indicates favorable market conditions and strong lender confidence. The extension of revolving periods for both facilities until 2027 and 2026 respectively provides long-term stability. However, the slight increase in interest rate for the $500 million asset-backed financing from 5.15% to 5.43% reflects current market trends. These moves strengthen CACC's position in the competitive auto financing sector, potentially leading to improved margins and growth opportunities.

Market Research Analyst

CACC's strategic financial maneuvers reflect a proactive approach to market dynamics. The company's focus on providing financing to consumers with challenging credit histories positions it uniquely in the auto lending space. By extending and expanding its facilities, CACC is preparing for potential market volatility and ensuring capital availability for its niche market. The lower interest rate on the expanded facility could translate to more competitive offerings, potentially driving market share growth. However, investors should monitor how effectively CACC manages the slight increase in interest rate on its asset-backed financing, as this could impact profitability in a price-sensitive market.

Southfield, Michigan , Sept. 19, 2024 (GLOBE NEWSWIRE) -- Credit Acceptance Corporation (Nasdaq: CACC) (referred to as the “Company”, “Credit Acceptance”, “we”, “our”, or “us”) announced today that we have increased the amount of Warehouse Facility II (the “Facility”), one of our revolving secured warehouse facilities, from $400.0 million to $500.0 million. We also extended the date on which the Facility will cease to revolve from April 30, 2026 to September 20, 2027. The interest rate on borrowings under the Facility has decreased from the Secured Overnight Financing Rate (“SOFR”) plus 230 basis points to SOFR plus 185 basis points.

There were no other material changes to the Facility. As of September 19, 2024, we had $201.0 million outstanding under the Facility.

Additionally, we announced today that we have extended the $500.0 million asset-backed non-recourse secured financing that we entered into on August 28, 2019 (the “Financing”) and to which we refer as Term ABS 2019-2. Under the amendment effecting the extension, the date on which the Financing will cease to revolve has been extended from August 15, 2025 to September 15, 2026. The amendment also increased the interest rate under the Financing from 5.15% to 5.43%.

There were no other material changes to the terms of the Financing.

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 changes were made to Credit Acceptance's (CACC) Warehouse Facility II?

Credit Acceptance increased Warehouse Facility II from $400.0 million to $500.0 million, extended its revolving period to September 20, 2027, and reduced the interest rate to SOFR plus 185 basis points.

How was Credit Acceptance's (CACC) Term ABS 2019-2 financing modified?

Credit Acceptance extended the revolving period of Term ABS 2019-2 financing to September 15, 2026, and increased the interest rate from 5.15% to 5.43%.

What was Credit Acceptance's (CACC) outstanding balance on Warehouse Facility II as of September 19, 2024?

As of September 19, 2024, Credit Acceptance had $201.0 million outstanding under Warehouse Facility II.

How does Credit Acceptance (CACC) help consumers purchase vehicles?

Credit Acceptance provides financing solutions that enable automobile dealers to sell vehicles to consumers regardless of their credit history, helping consumers who might otherwise be unable to purchase vehicles or would purchase unreliable ones.