KBRA assigns ratings to Carvana Auto Receivables Trust 2020-N1
NEW YORK–(COMMERCIAL THREAD) – Kroll Bond Rating Agency (KBRA) assigns ratings to five categories of notes issued by Carvana Auto Receivables Trust 2020-N1 (“CRVNA 2020-N1”), an ABS car loan transaction. CRVNA 2020-N1 represents the first ABS term securitization for the Company in 2020, the first under its non-prime shelf and the fifth in total.
In 2012, DriveTime Automotive Group Inc. (DriveTime) launched Carvana, an e-commerce platform for purchasing used vehicles. Carvana website (www.Carvana.com) provides a unique pre-owned vehicle shopping experience that enables customers to purchase vehicles online through an efficient and transparent process. Carvana’s target customer base is not specific to credit and aims to attract a broader credit spectrum and income classification than DriveTime. Originally launched in Atlanta, Georgia, Carvana has expanded nationwide and now operates in 161 markets. Carvana’s activities and operations fully integrate all stages of the vehicle purchasing process. The company is headed by founder and CEO Ernie Garcia III, who currently owns around 10%. The company completed its IPO in April 2017 and the shares are listed on the New York Stock Exchange under the symbol CVNA.
CRVNA 2020-N1 will issue five classes of notes rated AAA (sf) to BB (sf) for a total of $ 480.0 million. The transaction is secured by approximately $ 495 million in auto loans at closing. Auto loans are fixed rate installment loans to senior and non-senior borrowers with a non-zero weighted average FICO score of 554. In addition, as of the statistical close date, the loans have an average current principal balance of 17 $ 428, weighted average interest rate of 19.20% and weighted average initial term and remaining term of 71 and 69 months, respectively. The guarantee is made up of 100% used vehicles.
The transaction has initial credit enhancement levels of 58.35% for Class A Notes, 37.35% for Class B Notes, 31.85% for Class C Notes, 20.35 % for Class D Notes and 4.25% for Class E Notes. Credit Enhancement consists of excess margin, overcollateralisation, subordination (except category E) and a reserve account and a bank note interest reserve account financed at closing. This Note Interest Reserve Account may be used to cover payment shortfalls for Class A, B, C and D Notes. Bridgecrest Credit Company (“Bridgecrest”), is a subsidiary of DriveTime and will be the principal securitization service provider.
KBRA applied its Global Auto Loan ABS methodology and Global Structured Finance Counterparty methodology as part of its analysis of the underlying collateral pool of the transaction, the proposed capital structure and historical data from Carvana’s static pool, as well as as publicly available static pool loss data for comparable auto loan originators. . KBRA also conducted an operational assessment of the originator and the servicer, as well as a review of the legal structure of the transaction and transaction documents. KBRA reviewed the operational agreements and legal opinions of the transaction prior to closing.
Further information on key credit considerations, sensitivity analyzes that examine the factors that may affect these credit ratings and how they might lead to an improvement or a downgrade, and ESG factors (when they are a factor). key to the change in credit rating or rating outlook) can be found in the full assessment report mentioned above.
A description of all substantially significant sources that were used to prepare the credit rating and information about the methodologies (including significant models and sensitivity analyzes of relevant key rating assumptions, if any) used to determine the credit rating are available in the United States Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further information relating to this rating measure is available in the US Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures can be found at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the United States Securities and Exchange Commission. In addition, KBRA is appointed as the designated rating agency by the Ontario Securities Commission for issuers of asset-backed securities to file a simplified prospectus or a shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a credit rating provider and is a credit rating agency (ARC) certified with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a rating agency.