It appears Agora Data might be doing more than just creating a “level playing field” for dealerships and finance companies, but also providing a place for financial victories, too.
On Monday, the auto fintech firm announced the closing of ACAST 2022-1, the company’s most recent crowdsourced securitization that originated on Thursday.
Powered by proprietary machine learning algorithms and radical artificial intelligence, Agora said this most recent transaction aggregated more than 40 independent dealers and finance companies with auto portfolios ranging from $100,000 to more than $60 million into a single securitization.
Chief executive officer Steve Burke said this closing marks another major milestone in Agora’s commitment to non-prime auto originators and the auto finance market.
“I am excited for the dealer community as our patent pending use of artificial intelligence and finance solutions enable dealers of all sizes to compete on a level playing field with the large dealer groups and institutions,” Burke said in a news release.
“Securitizations enable Agora to offer higher advances plus abundant and affordable capital to independent dealers. The dealer receives all of the upside cash as consumer loans continue to perform. Furthermore, the non-recourse features of securitization help dealers with balance sheet management,” Burke went on to say.
Agora reiterated that its technology-based solutions offer dealers a way to grow without giving up their equity or assuming too much risk.
The company’s advanced data analytics forecast non-prime cash flows with precision using predictive modeling and artificial intelligence. The company’s platform also provides benchmarking and trends to maximize loan performance and optimize underwriting criteria to improve profitability.
“Our prior securitizations are performing in line with expectations, validating Agora’s comprehensive data analytics with at least 98 percent accuracy,” Agora chief financial officer Chris Hawke said in the news release. “For dealers, that means the secret to low-cost funding is now unlocked.
"As a bonus, dealers can leverage their newly found capital to grow more safely, efficiently, and sustainably, since their operations are based on predictable and reliable data,” Hawke went on to say.
The company expects to close more crowdsourced securitizations this year, providing “unprecedented” access to low-interest-rate funds and accelerating the growth of independent dealers and finance companies nationwide.
For more information about Agora’s suite of dealer resources, including its free technology platform with real-time data, visit www.agoradata.com or call (877) 592-4672.
Tricolor is more than just retailing vehicles in the Hispanic market nowadays.
Last week, Tricolor announced a $212 million social bond — what the company claims is the first ever in the United States collateralized by consumer auto asset backed securities (ABS) — to empower underserved, low-income communities and provide them with improved access to mainstream financing that ultimately allows them to build a better future.
According to a news release, J.P. Morgan Securities acted as the sole lead book-running manager.
Tricolor said this worthy achievement validates the application of capital markets investments to expand financial opportunities for low-income communities.
The company said the move also highlights a path for other purpose-driven enterprises using for-profit models to address social issues at scale.
Tricolor went on to say that the success of these installment contracts and the bond are rooted in Tricolor’s use of artificial intelligence to successfully underwrite and extend financing to credit invisible customers.
“We are excited to be the first in the U.S. to achieve a social bond designation across all auto consumer lending, enabling us to facilitate capital markets investment towards underserved Hispanic communities,” Tricolor founder and chief executive officer Daniel Chu said in the news release.
“This milestone issuance validates a path for capital markets investors to help accelerate our strategy to reverse systemic financial inequality in America, providing deserving people with access to reliable, affordable transportation and moving them into the financial mainstream, having been oversubscribed by an average of three times across all of the investment grade bonds,” Chu continued.
The Tricolor Social Bond is collateralized with paper designed to provide affordable access to vehicles for low-income consumers with no FICO score
Tricolor mentioned that it secured a second party opinion (SPO) from S&P Global Ratings to provide an opinion on the social benefits of this framework as well as the alignment to the International Capital Markets Association (ICMA) Social Bond Principles.
Tricolor said more than 59 million Hispanics in the United States would collectively rank as the eighth largest economy in the world. Yet, according to the FDIC National Survey of Unbanked and Underbanked Households, 32% of this US Hispanic population has no or limited access to mainstream credit.
George Wilkins from JPMorgan offered this perspective on Tricolor’s move.
“Congratulations to Tricolor for demonstrating an innovative new way to leverage social bonds,” Wilkins said in the news release. “This first for the Auto ABS market will help establish a new precedent for attracting support from capital markets investors for underserved populations.”
For more information about Tricolor, visit tricolorholdings.com and tricolor.com.
America’s Car-Mart not only is in the buy-here, pay-here business. The company with more than 150 dealerships in 12 states now is in the securitization market, too.
On Monday, Car-Mart announced pricing of its inaugural asset-backed securitization transaction. The company priced $400 million in aggregate principal amount of asset-backed notes in a subprime auto finance asset-backed securitization transaction.
The notes will be issued in four classes, collateralized by contracts directly originated by the company’s operating subsidiaries.
Car Mart highlighted the classes have expected ratings of AA- through BB- by Kroll Bond Rating Agency (KBRA) and have a final maturity date of April 20, 2029.
The company explained credit enhancement for the notes will consist of overcollateralization, a reserve account funded with an initial amount of not less than 2.00% of the pool balance as of the cut-off date, excess interest on the receivables, and, in the case of the Class A Notes, the Class B Notes and the Class C Notes, the subordination of certain payments to the noteholders of less senior classes of notes.
Additional details related to the notes are as follows:
| Initial Principal Amount |
Initial Credit Enhancement |
Fixed Coupon Rate (per annum) |
Preliminary KBRA Rating(1) |
| Class A Notes |
$ |
236,000,000 |
60.70% |
3.23% |
AA- (sf) |
| Class B Notes |
|
52,000,000 |
51.60% |
4.47% |
A- (sf) |
| Class C Notes |
|
74,570,000 |
38.55% |
5.48% |
BBB- (sf) |
| Class D Notes |
|
37,430,000 |
32.00% |
8.58% |
BB- (sf) |
| Total |
$ |
400,000,000 |
|
|
|
| |
|
|
|
|
|
| (1) |
|
KBRA appends an (sf) indicator to ratings assigned to structured finance obligations. |
Chart courtesy of Car-Mart.
Car-Mart explained the notes were priced with a weighted average fixed coupon rate of 5.14% per annum to the expected clean-up call. The notes will be issued by ACM Auto Trust 2022-1, an indirect subsidiary of the company.
The Issuer will be the sole obligor of the notes, and the notes will not be obligations of or guaranteed by the company or any of its other affiliates or subsidiaries, according to Car-Mart, which will act as the servicer of the auto receivables securing the notes.
Car-Mart said through a news release that the net proceeds from the notes will be used to pay outstanding debt, make the initial deposit into a reserve account, and for other general purposes.
The expected settlement date for the transaction is Thursday.
“We are excited to diversify our funding sources by entering the securitization market. This transaction represents an important step as we prepare for continuing growth,” Car-Mart president and chief executive officer Jeff Williams said. “As we look ahead, this market will offer us greater access to credit with a more efficient capital structure.”
In connection with the asset-backed securitization transaction, Car-Mart also entered into amendment No. 4 to the company’s third amended and restated loan and security agreement with BMO Harris Bank as agent for a group of lenders.
Car-Mart explained amendment No. 4 amends the agreement to permit the sale, contribution, or transfer of vehicle contracts to, and certain repurchases of such contracts from, an indirect special purpose subsidiary of the company in connection with a securitization transaction, in each case subject to specified conditions.
The amendment also replaces LIBOR as the applicable benchmark interest rate for borrowings under the agreement with the daily simple secured overnight financing rate (SOFR) and increases the unused line fee rate from 0.25% to 0.375% if the average daily amount outstanding during the preceding month is less than 50% of the revolver commitments.
Steve Burke’s role as chief executive officer of Agora Data gives him a tremendous vantage point to access the current financial status of independent and buy-here, pay-here dealerships as well as activities within the automotive securitization market.
And during the opening week of the year, Burke returned for this episode of the Auto Remarketing Podcast to share what he’s observing.
To listen to the conversation, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
This week, Tricolor announced details of its seventh securitization that included a class to gain a AAA rating.
The used-vehicle retailer that specializes in the Hispanic market, rolled out an issuance of $234 million of asset-backed bonds secured by a pool of its installment contracts.
According to a news release, JPMorgan Securities LLC acted as the sole lead book-running manager and Barclays acted as co-manager.
Tricolor highlighted the Class A, Class B, Class C, Class D, Class E, and Class F bonds that were issued received ratings of AAA, AA-, A, BBB, BB, B, respectively, from Kroll Bond Rating Agency.
The company added that the Class A, Class B, Class C, Class D, Class E, and Class F were placed with a diversified mix of 20 institutional investors in a private offering pursuant to Rule 144A under the Securities Act of 1933, as amended.
“We are extremely excited to have attracted an expanded set of institutional investors to support our growth having been oversubscribed by more than three times,” Tricolor Holdings founder and chief executive officer Daniel Chu said in the news release.
“Achieving a AAA rating is an important milestone for our company and a strong validation of our technology’s unique ability to provide access to affordable and responsible lending for a historically underserved community,” Chu continued.
Tricolor issued its first securitization in July 2013. Leveraging advanced artificial intelligence, nearly 14 years of proprietary customer insights, and more than 22 million unique, non-traditional attributes, Tricolor has worked with more than 85,000 customers and booked more than $1.5 billion in installment contracts.
“Socially responsible offerings are a key focus amongst capital markets investors. Tricolor’s proven ability as a successful lender to an underserved population is a key differentiator in the ABS market,” J.P. Morgan managing director George Wilkins said in the news release.
Agora Data again used the old adage, “strength in numbers,” to leverage the capabilities of the securitizations market for operations that typically do not have the size or scale to attract investment-community interest.
This week, the company announced the successful closing of its second crowdsourced securitization, ACAST 2021-1, on May 27. With the closing of this second transaction, the AgoraCapital program has provided 40 buy-here, pay-here dealers and subprime finance companies with efficient, capital markets access by bundling nearly $200 million in subprime paper.
Agora closed its first securitization just before the close of last year.
Agora Data chief executive officer Steve Burke explained why the ACAST 2021-1 closing marks an important continuation of the company’s developments in the world of structured finance.
“Our AgoraCapital program helps subprime originators proactively plan for the future. It levels the playing field by enabling dealers to borrow more money at a lower cost without the restrictions of other lending sources,” Burke said in a news release.
“There is simply no other affordable and abundant capital for a dealer to safely triple in size without giving up control or equity in its business continued,” he continued.
By participating in an Agora crowdsourced securitization, Burke reiterated that subprime auto entrepreneurs now can gain access to the capital markets like the large dealer groups and institutions have with low-cost capital to maximize their financial leverage and significantly grow their businesses.
Unlike traditional lending sources, not only does Agora provide the needed capital for growth but the company emphasized that it also helps dealers grow safely.
“Our first transaction in December 2020 was groundbreaking. However, in many ways, this second deal is even more significant as it solidifies that AgoraCapital and our ability to deliver for the dealer community is here to stay. Agora is well into its mission to revolutionize how dealers borrow money,” Agora Data chief revenue officer Chris Hawke said.
To get involved in future company securitizations, go to agoradata.com.
Sometimes, too many cooks in the kitchen can be a recipe for disaster.
But Agora Data championed a financial dish with several buy-here, pay-here operators and smaller finance companies that the tech firm says “represents a quantum leap” for their access to capital markets funding.
This week, Agora Data announced the successful closing of what it believes is the first-ever crowdsourced auto securitization; a development that came to fruition on Dec. 29.
Fueled by artificial intelligence and machine learning, Agora Data aggregated numerous originators with portfolios ranging in size from $11,000 to more than $20 million into a single capital markets securitization. Agora Data chief executive officer Steve Burke highlighted three specific achievements, including:
• One dealer had a $10 million portfolio paying its senior lender 14% with a 60% advance rate, personal guarantees, restrictive financial covenants and was at full capacity, so he could not sell more vehicles.
• On Dec. 29, that senior lender was paid off in full. The dealer’s new rate is 6.5% with a 62% advance (cash out over and above senior lender payoff), plus residual cash based on the quality of receivables, no personal guaranty and no financial covenants. Now the operator can build up another $10 million with consistent underwriting.
• Within 12 months, that dealer will have doubled the operation’s portfolio, cut the interest rate by more than 50%, increased the advance by 3.5% and can repeat the again.
Prior to Agora Data’s technology, Burke pointed out that direct access to the capital markets with more favorable financing terms was limited to only the largest institutional lenders and auto dealers. With an AgoraCapital crowdsourced securitization, Burke said subprime originators of all sizes now have a “unique and viable” financing option to obtain lower-cost capital providing liquidity and fueling growth.
“AgoraCapital has revolutionized access to affordable and abundant capital for the BHPH dealer and small to mid-tier finance companies,” Burke said in a news release. “This type of transaction has never been accomplished before due to the complexity of different originators and lack of technology.
“We have overcome all of these obstacles and we are energized by this achievement that will unquestionably shape the future for dealers, finance companies, capital markets and consumers,” he continued.
Agora Data chief revenue officer Chris Hawke described how the firm worked with numerous different shops to create a product to benefit all of the participants.
“We effectively aligned numerous buy-here, pay-here dealers and finance companies into a single transaction,” Hawke said. “This successful transaction further validates Agora Data’s mission to develop financial solutions that advance the growth of BHPH dealers and finance companies in ways previously unimaginable.”
For more information, visit www.agoradata.com or contact Agora Data at (877) 592-4672 or [email protected].
This week, Tricolor went back to the investment world, announcing the sixth securitization in company history.
The Community Development Financial Institution (CDFI) and the used-car retailer focusing on the sale and financing of vehicles to Hispanics said their action included the issuance of $167 million of asset-backed bonds secured by a pool of its installment contracts.
The company said the portfolio included contracts originated by Tricolor’s affiliate company, Ganas Auto Group, which operates in California.
Tricolor said in a news release that the Class A and Class B bonds were placed with a diversified mix of institutional investors in a private offering pursuant to Rule 4(a)(2) under the Securities Act of 1933, as amended.
JPMorgan Chase & Co. served as the investment advisor and representative of the purchasers.
“Tricolor’s use of technology to help financially underserved borrowers gain access to a high-quality vehicle and affordable financing even amidst these turbulent times stands out within the capital markets,” Tricolor Holdings chief executive officer Daniel Chu said.
“We are grateful to our consumers for their outsized role as essential workers on the front lines of the pandemic over the last six months,” Chu continued. “In return, we remain committed to innovating on their behalf to help all low-income individuals bridge the economic inequality gap in America.”
Tricolor issued its first securitization in July 2013.
“This press release does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction,” the company said.
For more information about Tricolor and Ganas, visit tricolor.com and ganas.com.
Tricolor recently released a whitepaper about its success as a subprime auto-finance provider that specializes in working with Hispanic consumers, receiving designation as a Community Development Financial Institution (CDFI) by the U.S. Treasury Department last year.
Not only does the federal government applaud Tricolor’s 13-year-old automotive enterprise, but also just last week Kroll Bond Rating Agency upgraded ratings of three classes of asset-backed securities Tricolor issued back in 2018. KBRA said it made the move in the midst of the coronavirus pandemic “due to increased credit enhancement that is sufficient to support the rating actions.”
Tricolor reiterated in its whitepaper titled, “Responsible Lending in Subprime Automotive Finance” that it has four “building blocks” to building the company that indicated as of February it had originated nearly $1 billion in auto financing at its network of dealerships throughout California and Texas. Those four components highlighted included:
— Provide affordable financing to low-income borrowers through lower interest rates and lower gross margins, increasing the probability of their success in repayment.
— Help borrowers to establish bureau credit by reporting to major bureaus, through partnerships with Experian and Equifax, regardless of status, in order to ultimately mainstream credit invisible borrowers.
— Leverage technology and deep learning to develop a proprietary model in order to segment borrowers with little or no credit history, driving more favorable and attractive lending terms.
— Support customers with financial literacy programs with customized content to empower them in order to access mainstream financing and ultimately, build a better future.
“Since launching our business over 12 years ago, our mission has been to enhance the life of our customer with access to affordable financing, the opportunity to build credit, and ultimately, a path to a better future. Importantly for us, the CDFI certification validates our core beliefs and purpose-driven aspiration to do well by doing good,” Tricolor wrote in its whitepaper.
Last November, the company landed that CDFI certification, which provides Tricolor with greater opportunities to partner with banks to expand its affordable, credit building lending strategy. The designation can enable banks to legally invest in Tricolor securities to promote public welfare and fulfill their Community Reinvestment Act (CRA) obligations.
And in February, an unnamed institution did just that, as Tricolor announced it received a $30 million preferred equity investment from a global institutional investor.
Tricolor emphasized the approximately 1,000 certified CDFIs in the U.S. are selected as part of an extensive application and review process. The majority are nonprofits. Tricolor said it becomes the only lender among all auto asset-backed securities issuers to earn CDFI certification and one of a select group of for-profit enterprises that meet the rigorous standards for helping communities.
“We are humbled and honored to join this exclusive group of CDFIs as named by the U.S. Department of the Treasury. It truly speaks to the essence of our mission-driven work and will enable us to grow in service to even more deserving individuals,” Tricolor founder and chief executive officer Daniel Chu said in a news release at the time of the November announcement.
“Since the beginning, our commitment has been to put the customer’s best interests and needs at the center of every interaction, and this certification not only validates this purpose but significantly enhances our ability to scale our lending platform,” Chu added.
And having the support of investment experts and observers certainly could be helpful, too.
KBRA dissected Tricolor’s latest activities and the reasoning for its rating action in this report.
