SOUTHFIELD, Mich. — Earlier this month, Credit Acceptance announced the completion of a $110.5 million asset-backed non-recourse secured financing.

For this transaction, the company said it contributed loans having a net book value of about $142.3 million to a wholly owned special purpose entity which will transfer these loans to a trust. Ultimately, this entity will issue three classes of notes.

The Class A Notes are rated "AAA" by Standard & Poor's Rating Services and DBRS. Meanwhile, the Class B Notes are rated "AA" by S&P. Finally, the Class C Note does not bear interest, is not rated and will be retained by the company.

Note Class A

Amount: $82.5 million

Average Life: 1.89 Years

Price: 99.98732

Interest Rate: 3.96 percent

 

Note Class B

Amount: $28 million

Average Life: 2.48 Years

Price: 99.99494

Interest Rate: 5.68 percent

Note Class C

Amount: $3.3 million

Average Life: 2.48 Years

Price: N/A

Interest Rate: N/A

These notes will have an expected annualized cost of about 5.2 percent, including the initial purchaser's fees and other costs. Furthermore, these will revolve for 18 months after which they will amortize based upon the cash flows of the contributed loans. And officials said these notes will be used to repay outstanding indebtedness.

The company indicated it will receive 6 percent of the cash flows related to the underlying consumer loans to cover servicing expenses.

"The remaining 94 percent, less amounts due to dealer-partners for payments of dealer holdback, will be used to pay principal and interest on the notes as well as the ongoing costs of financing," officials explained.

"The financing is structured so as not to affect the company's contracted relationship with its dealer-partners and to preserve the dealer-partners' rights to future payments of dealer holdback," they continued.

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 U.S. absent registration or an applicable exemption from registration requirements, according to Credit Acceptance.