KBRA Affirms and Downgrades Ratings from CarNow Auto Receivables Trusts

KBRA affirms its ratings on six classes of notes and downgrades its ratings on five classes of notes issued from four CarNow Auto Receivables Trust (“CNART”) transactions. The six affirmations across three transactions reflect credit support that is sufficient to support the outstanding ratings. The five downgrades across three transactions reflect ongoing deterioration in collateral credit performance and a decrease in overcollateralization. Of the classes with downgraded ratings, three have been lowered to CCC (sf) or below, reflecting their increased risk of principal loss over their remaining term. The data used for this review is as of the March 2025 distribution date (February 2025 collection period). To date, the securities have received timely interest payments.

KBRA’s projected losses have increased on three CNART transactions since their last review reflecting a combination of higher defaults and lower recoveries. KBRA also assumed lower recovery rates across all four transactions, reflecting lower vehicle prices and the Servicer’s retention of additional repo-related costs, a practice the servicer began in December 2024. Additionally, the servicer, Byrider Finance, LLC has sought approval to increase the Servicing Fee on all outstanding CNART transactions from 4.0% to 10.0%. KBRA’s rating analysis considered current elevated fees as well as sensitivity scenarios where servicing fees were increased to the proposed amendment levels. These ratings actions reflect KBRA’s consideration of its base case losses, stress multiples, and cashflow analysis results in the context of the Company’s current financial and operating position.

Byrider Finance, LLC, dba CarNow Acceptance Company (collectively “Byrider” or “the Company”) operated a used vehicle retailer in the U.S. that focused on both the sale and financing of vehicles to subprime borrowers whose FICO scores are 650 and below. The Company was founded in 1989 and was acquired by Altamont Capital Partners in May 2011. Byrider’s business model consisted of vehicle acquisition, reconditioning, sales, underwriting, financing, loan servicing and after-sale support. The Company oversaw a network of Company-owned and franchised stores, with a primary geographical focus on the Midwest, Mid-Atlantic, and Southeast regions.

Since September 2024, Byrider no longer originates auto loans. The Company has continued to service the outstanding auto loans and expects to continue servicing going forward. Additionally, the Company continues to provide after-sale servicing on the vehicles through either third-party vendor relationships or nearby Byrider franchised locations.

The Company has been generating a financial net loss since 2015 due in large part to deferred revenue associated with the Company’s change from offering vehicle warranties to offering extended service contracts and more recently due to the cessation of loan originations. Adjusted EBTDA was positive for 2021 but has been negative since 2022. As of March 31, 2025, Byrider has approximately $1.9 million in unrestricted cash, $9.5 million in adjusted shareholders equity (after adjusting to include subordinated debt, contingent value rights and deferred service contract revenue). As of March 31, 2025, the Company has one revolving debt facility: an ABL line of credit with $90.2 million outstanding, which expires in December 2027.

As Servicer, Byrider performs all stages of collection activities in-house, including management over the repossession process for charged-off receivables. If a Servicer Termination Event were to occur and be exercised, Computershare Trust Company, N.A., as the back-up servicer for the transactions, 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.

In performing its rating review, KBRA utilized its Auto Loan ABS Global Rating Methodology, as well as its Global Structured Finance Counterparty Methodology and ESG Global Rating Methodology. In determining these rating actions, KBRA reviewed the collateral performance to date and projected the remaining loss for the transactions based on current assumptions. The rating actions, along with related deal and tranche performance information, are available in spreadsheet form in the accompanying CarNow Auto Receivables Trust Comprehensive Surveillance Dashboard.

The related transactions are listed further below with links to the appropriate page on kbra.com which show the applicable resulting ratings.

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For additional information regarding a specific transaction, see the list below to access ratings, reports, and disclosures:

Methodologies