KBRA Maintains Watch Developing Placement on ACC Auto Trust 2022-A
16 Oct 2024 | New York
KBRA maintains its Watch Developing Placement on all outstanding notes issued by ACC Auto Trust 2022-A (“AUTOC 2022-A”), an auto loan ABS transaction. The ratings were previously placed on Watch Developing on July 18, 2024 due to the financial health of Automotive Credit Corporation (“ACC Auto” or the “Company”). ACC Auto is the Servicer for this transaction and according to the Company’s FY 2023 audited financial statements provided to KBRA, ACC Auto’s management believes there is substantial doubt about the Company’s ability to continue as a going concern due to its adoption of ASC 326 Financial Instruments and the Company’s lack of liquidity.
The table below displays the current capital structure and Watch Placements undertaken in this review. To date, the securities have received timely interest payments; however, the AUTOC 2022-A Class D has previously been lowered to CCC (sf), due to deteriorating collateral credit performance and decreased overcollateralization. This Class has an increased risk of principal loss and is susceptible to interest shortfalls in the future.
Following the Watch Placement in July 2024, management continues to finalize its plan to convert the majority of the Company’s subordinated debt into preferred equity and amend covenants with existing lenders. KBRA has been in dialog with ACC Auto who has indicated the conversion is expected to be executed in Q4 2024.
AUTOC 2022-A is an amortizing securitization secured by subprime auto loans originated by ACC Auto. As Servicer, the Company performs all stages of collection activities in-house, including management over the repossession process for charged-off receivables. If a Servicer Event of Default were to occur and be exercised, Vervent, Inc., as back-up servicer, would assume these responsibilities. This transfer may create delays in collections, increases in delinquencies and charge-offs, and lower overall recoveries on previously defaulted receivables.
As of the September 2024 distribution date (August 2024 collection period), the cumulative net loss, excluding repurchases, for AUTOC 2022-A was 22.33%. The current delinquency level for AUTOC 2022-A was 15.72% and is depicted in the below chart.
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