CPS Secures $416.82 Million in Asset-Backed Securitization
Consumer Portfolio Services, Inc. (NASDAQ: CPSS), a prominent player in automotive financing, has successfully completed its fourth securitization of the year. This major transaction, which involves the issuance of $416.82 million in asset-backed notes, highlights the company's strong position in the financial market. Importantly, this marks the 53rd senior subordinate securitization since 2011, continuing a remarkable series of 36 straight securitizations that have earned a triple 'A' rating from at least two rating agencies for the senior class of notes.
Details of the Securitization
The securitization saw qualified institutional buyers acquire asset-backed notes that are secured by $436.00 million worth of automobile receivables originated by CPS. These notes were issued through the CPS Auto Receivables Trust 2024-D, which features five different classes of notes. The prestigious rating agencies, Standard & Poor’s and DBRS Morningstar, assigned their ratings after meticulously reviewing the transaction structure alongside the historical performance of similar asset classes. This thorough analysis reflects CPS’s long-standing dedication to being a dependable servicer in the market.
Structure of the Notes
The asset-backed notes are divided into various classes, each with different amounts and interest rates. The weighted average coupon across these notes is roughly 5.52%. Here’s a snapshot of the note classes:
Class A: $188.352 million at a 4.91% interest rate, with an average life of 0.71 years, rated AAA by both S&P and DBRS.
Class B: $56.240 million at a 4.65% interest rate and an average life of 1.75 years, rated AA.
Class C: $71.944 million at 4.76%, featuring an average life of 2.43 years, rated A.
Class D: $45.998 million at 5.14%, with an average life of 3.29 years, rated BBB.
Class E: $54.282 million at 7.13%, having an average life of 4.13 years, rated BB.
Enhancements & Funding Structure
This transaction incorporates an initial credit enhancement, which includes a cash deposit equaling 1.00% of the original receivable pool balance, as well as an overcollateralization of 4.40%. To safeguard the quality and security of the notes, the agreements include accelerated principal repayment strategies aimed at achieving overcollateralization of the lesser of 9.00% of the original receivable pool balance or 25.60% of the outstanding pool balance.
In addition, a pre-funding structure was adopted; CPS sold approximately $298.42 million worth of receivables when the transaction began and plans to sell about $137.58 million more in receivables over the next month. This approach aims to secure long-term financing for newly acquired receivables.
About Consumer Portfolio Services
Consumer Portfolio Services, Inc. focuses on offering indirect automobile financing, especially to those facing past credit challenges. This independent finance company purchases retail installment sales contracts primarily from franchised automobile dealerships, with an emphasis on late model used vehicles, as well as some new cars. The company mainly funds these acquisitions through the securitization markets, allowing them to assist numerous consumers in fulfilling their automobile financing needs.
Investor Relations
If you have any inquiries related to investor relations, please reach out to:
Danny Bharwani, Chief Financial Officer
949-753-6811
Frequently Asked Questions
What is the purpose of CPS's securitization?
The purpose of the securitization is to help CPS raise capital backed by automobile receivables, which in turn boosts its financing capabilities.
How often does CPS conduct securitizations?
CPS has completed 53 senior subordinate securitizations since 2011 and maintains a steady rate of issuance.
What types of vehicles fund the contracts?
The contracts mainly involve late model used vehicles and some new vehicles.
What is the importance of the AAA rating?
A AAA rating indicates a low risk of default, making CPS's offerings more appealing to institutional investors.
Who can be contacted for more information on investor relations?
Danny Bharwani, the Chief Financial Officer, is the primary contact for any investor-related questions.