CPS Announces $50.0 Million Securitization of Residual Interests

Rhea-AI Summary

Consumer Portfolio Services, Inc. (CPSS) announced the closing of a $50.0 million securitization of residual interests from previously issued securitizations. The transaction involved a qualified institutional buyer purchasing asset-backed notes secured by an 80% interest in a CPS affiliate owning residual interests in five securitizations. Collateral includes amounts from underlying spread accounts and over-collateralization. Monthly payments consist of interest and principal to maintain a minimum collateral ratio, with the offering being private and unregistered.

Insights

Financial Analyst

The closing of a $50.0 million securitization of residual interests by Consumer Portfolio Services signifies a strategic financial maneuver in the asset-backed securities market. This move allows CPS to leverage its existing securitization structures to generate immediate liquidity. The transaction involves an 80% interest in a CPS affiliate, which underscores a partial yet significant transfer of economic interests in the underlying securitizations.

From a financial standpoint, the collateral composition, comprising spread account balances and over-collateralization, indicates a risk mitigation strategy. The reliance on over-collateralization as a safety cushion reflects CPS's commitment to ensuring the security of the notes. By tying the principal payments to a minimum collateral ratio, CPS further aligns the interests of the note holders with the performance of the underlying assets.

The private nature of the offering, being outside the purview of the Securities Act of 1933, suggests a targeted approach towards sophisticated investors, likely due to the complex nature of the securities involved. This approach can be advantageous for CPS as it may result in more favorable terms compared to public offerings. However, it is also indicative of a higher risk profile that may be associated with such securities, which is typically more acceptable to qualified institutional buyers.

Market Research Analyst

Consumer Portfolio Services' recent securitization transaction may signal confidence in the performance of its loan portfolios, as residual interests are often retained for their potential upside. The sale of these interests to an institutional buyer could reflect a positive outlook on the credit performance of CPS's underlying assets. Market participants often view such transactions as a barometer for the health of the consumer finance sector, especially in subprime markets where CPS operates.

Furthermore, this transaction may have implications for CPS's stock performance. Investors typically interpret securitization deals as a means to improve a company's balance sheet strength and liquidity position. The immediate influx of $50.0 million enhances CPS's financial flexibility, which could be utilized for further lending activities or for other strategic initiatives. In the long term, the impact on the stock will hinge on the company's ability to deploy this capital effectively and the ongoing performance of the securitized assets.

LAS VEGAS, Nevada, March 22, 2024 (GLOBE NEWSWIRE) --  Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced the closing of a $50.0 million securitization of residual interests from previously issued securitizations.

In the transaction, a qualified institutional buyer purchased $50.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the residual interests in five CPS securitizations issued from January 2022 through January 2023.

Collateral for the notes includes 80% of the amounts on deposit in the underlying spread accounts for each related securitization and 80% of the over-collateralization of each related securitization, which is the difference between the outstanding principal balance of the related receivables less the outstanding principal balance of the notes associated with the securitization. On each monthly payment date, the notes will be paid interest at the coupon rate and, if necessary, a principal payment necessary to maintain a specified minimum collateral ratio.

The transaction was a private offering of securities, not registered under the Securities Act of 1933, or any state securities law. All of such securities having been sold, this announcement of their sale appears as a matter of record only.

About Consumer Portfolio Services, Inc.

Consumer Portfolio Services, Inc. is an independent specialty finance company that provides indirect automobile financing to individuals with past credit problems or limited credit histories. We purchase retail installment sales contracts primarily from franchised automobile dealerships secured by late model used vehicles and, to a lesser extent, new vehicles. We fund these contract purchases on a long-term basis through the securitization markets and service the contracts over their lives.

Investor Relations Contact

Danny Bharwani, EVP/ Chief Financial Officer
844-878-CPSS (844-878-2777)

FAQ

What is the ticker symbol of Consumer Portfolio Services, Inc. mentioned in the press release?

CPSS

What was the total amount involved in the securitization transaction mentioned in the press release?

$50.0 million

Who purchased the asset-backed notes in the transaction mentioned in the press release?

A qualified institutional buyer

What is the collateral for the notes in the securitization transaction?

Includes amounts from underlying spread accounts and over-collateralization

Were the securities offered in the transaction registered under the Securities Act of 1933?

No, it was a private offering of securities

What happens on each monthly payment date for the notes in the transaction?

The notes will be paid interest at the coupon rate and, if necessary, a principal payment to maintain a specified minimum collateral ratio