Credit Acceptance Corp. Announces Completion of First Securitization
9 July 1998
Credit Acceptance Corp. Announces Completion of First Securitization
SOUTHFIELD, Mich.--July 8, 1998--Credit Acceptance Corp. announced today the completion of its first securitization.Pursuant to this transaction, the company contributed dealer advances having a net book value of approximately $56 million to a wholly-owned special purpose corporation (the "SPC") and received approximately $50 million in financing from an institutional investor. The financing bears interest at a floating rate equal to the thirty day commercial paper rate plus 1 percent with a maximum rate of 7.5 percent, is anticipated to fully amortize within thirty months, and is secured by the dealer advances and the rights to collections on the related installment contracts receivable contributed to the SPC up to the sum of the related dealer advance and the company's servicing fee.
The company will receive a monthly servicing fee equal to 4 percent of the collections of the contributed installment contracts receivable. Amounts due to dealers in respect of payments of dealer holdbacks will be remitted to the company for distribution to the respective dealers on a monthly basis. Except for a servicing fee and payments due to dealers, the company will not receive any portion of collections on the installment contracts receivable until the underlying indebtedness has been repaid in full. Donald A. Foss, founder and chairman of the company, stated: "We are pleased to diversify the company's funding alternatives while fully protecting all of the rights of our participating dealers." Using a unique securitization structure, the company was able to fully preserve the rights of its dealers to future payments of dealer holdbacks. The securitization was structured by NationsBanc, Montgomery Securities, LLC.
The proceeds of the transaction were used to reduce indebtedness under the company's line of credit and revolving credit facilities. Concurrent with the completion of the securitization, the commitment level on the company's line of credit is reduced from $120 million to $96.3 million while the commitment level on the company's revolving credit facility is reduced from $80 million to $64.2 million.
Credit Acceptance Corp. is a specialized financial services company which provides funding, receivables management, collection, sales training and related products and services to automobile dealers selling vehicles to consumers with limited access to traditional sources of consumer credit.