Credit Acceptance to invest $33M, add more than 500 workers


The Michigan Economic Development Corp. (MEDC) this week highlighted the investment and additional personnel Credit Acceptance plans to leverage going forward.

Because, state officials said, the subprime auto finance company “is experiencing significant growth and needs to expand its facilities in the city of Southfield,” Credit Acceptance plans to invest $33 million in its infrastructure and create approximately 530 new jobs.

As a result, the company has been awarded a $2.3 million Michigan Business Development Program performance-based grant and the city of Southfield has offered support to the company in the form of a property tax abatement.

“The Michigan Strategic Fund took on an extensive agenda that promotes a wide array of new economic opportunities for the people of Michigan,” Gov. Rick Snyder said. “Today’s actions continue to demonstrate a commitment to keep Michigan on the path toward our future that leads to more jobs and better lives for our residents.”

MEDC chief executive officer Steve Arwood echoed a similar sentiment when commenting about the actions by Credit Acceptance and a trio of other Michigan firms “will fuel new economic activity across Michigan, strengthen communities and create well-paying jobs for our residents.”

When Credit Acceptance detailed its latest financial statement back on Jan. 31, the company said its year-over-year economic profit increases came in at 12.0 percent during the fourth quarter and 13.9 percent for all of 2016. The company computes economic profit as a function of the return on capital in excess of the cost of capital and the amount of capital invested in the business.

Credit Acceptance’s latest ABS move

In other company news, Credit Acceptance recently announced the completion of a $350.0 million asset-backed non-recourse secured financing. Pursuant to this transaction, the company contributed contracts having a net book value of approximately $437.8 million to a wholly-owned special purpose entity which will transfer the loans to a trust, which will issue three classes of notes:

Note Class Amount Average Life Price Interest Rate
 A  $236,000,000  2.51 years  99.99451%  2.56%
 B  $65,500,000  3.22 years  99.97989%  3.04%
 C  $48,500,000  3.47 years  99.99149%  3.48%

Credit Acceptance said this financing action has three components, including:

—To have an expected annualized cost of approximately 3.1 percent including the initial purchaser’s fees and other costs

—To revolve for 24 months after which it will amortize based upon the cash flows on the contributed contracts

—To be used by the company to repay outstanding indebtedness

“We will receive 6.0 percent of the cash flows related to the underlying consumer loans to cover servicing expenses,” Credit Acceptance said. “The remaining 94.0 percent, less amounts due to dealers for payments of dealer holdback, will be used to pay principal and interest on the notes as well as the ongoing costs of the financing.

“The financing is structured so as not to affect our contractual relationships with our dealers and to preserve the dealers’ rights to future payments of dealer holdback,” the company went on to say.