SOUTHFIELD, Mich. -

After revealing a change in its latest quarterly report about how dealer fees are collected, Credit Acceptance Corp. also recently shared the details about its completion of a $351.7 million asset-backed non-recourse secured financing.

Pursuant to this transaction, Credit Acceptance said it contributed contracts having a value of approximately $439.6 million to a wholly-owned special purpose entity, which will transfer the contracts to a trust. That trust will issue three classes of notes, including:

Note Class Amount Average Life Price Interest Rate
 A  $237,500,000  2.61 years  99.98459%  2.38%
 B  $67,900,000  3.51 years  99.98063%  2.86%
 C  $46,300,000  3.81 years  99.97727%  3.06%

Credit Acceptance explained the Financing will accomplish three objectives, including:

— Have an expected annualized cost of approximately 2.9% including the initial purchaser’s fees and other costs

— Revolve for 24 months after which it will amortize based upon the cash flows on the contributed contracts

— Be used by the company to repay outstanding indebtedness

Credit Acceptance said it will receive 6.0% of the cash flows related to the underlying consumer contracts to cover servicing expenses. The company added the remaining 94.0%, 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. 

“The financing is structured so as not to affect our contractual relationships with our dealers and to preserve the dealers’ rights to future payments of dealer holdback,” company officials said in a news release.

Credit Acceptance pointed out 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.

Meanwhile, Credit Acceptance also addressed the topic of its dealer network when it reported its third-quarter financial statement. The company explained that beginning on Aug. 5, dealers were able to enroll in its portfolio program without incurring an enrollment fee.

Prior to August 5, Credit Acceptance noted that dealers enrolled in its portfolio program either by paying an up-front, one-time fee of $9,850, or agreeing to allow the finance company to retain 50% of their accelerated dealer holdback payment(s) on the first 100 consumer retail installment contract assignments.

Credit Acceptance also mentioned that access to its purchase program is typically only granted to dealers that meet one of the following:

— Assigned at least 100 consumer contracts under the portfolio program

— Franchised dealership

— Independent dealership that meets certain criteria upon enrollment

Credit Acceptance reported that it closed the third quarter with 9,555 active dealers, representing a 10% lift year-over-year. The company classifies active dealers as operations that have received funding for at least one contract during the quarter.

As a result of its change, Credit Acceptance responded to questions from investment analysts about how not only the strategy change would impact its financial statement, but also whether the company could continue to generate double-digit growth in its dealer network.

“So we eliminated the fee, obviously, to get rid of an obstacle to growing the dealer program. But it’s hard to say how that will play out in the enrollment metrics going forward,” Credit Acceptance chief executive officer Brett Roberts said during the company’s latest quarterly conference call.