Kroll Bond Rating Agency (KBRA) assigns ratings to five classes of notes issued by Carvana Auto Receivables Trust 2020-N1 ("CRVNA 2020-N1"), an auto loan ABS Transaction. CRVNA 2020-N1 represents the first term ABS securitization for the Company in 2020, the first under its non-prime shelf, and the fifth overall.
In 2012, DriveTime Automotive Group Inc. (DriveTime) launched Carvana, an eCommerce platform for buying used vehicles. Carvana’s website (www.Carvana.com) offers a unique used vehicle buying experience that enables customers to purchase vehicles online through an efficient and transparent process. Carvana's target customer demographic is not specific to credit and is geared to attract a broader credit spectrum and income classification than that of DriveTime. Initially launched in Atlanta, Georgia, Carvana has expanded nationally and is now operating in 161 markets. Carvana’s business and operations fully integrate all steps of the vehicle purchase process. The Company is led by founder and CEO Ernie Garcia III who currently owns approximately 10%. The company completed its IPO in April 2017, and the stock trades on the New York Stock Exchange under the symbol CVNA.
CRVNA 2020-N1 will issue five classes of notes rated AAA (sf) though BB (sf) totaling $480.0 million. The transaction is collateralized by approximately $495 million of automobile loans at closing. The automobile loans are fixed rate installment loans, made to prime and non-prime borrowers with a weighted average non-zero FICO score of 554. In addition, as of the statistical cutoff date, the loans have an average current principal balance of $17,428, weighted average interest rate of 19.20%, and weighted average original term and remaining term of 71 and 69 months, respectively. The collateral is 100% used vehicles.
The transaction has initial credit enhancement levels of 58.35% for the Class A Notes, 37.35% for the Class B Notes, 31.85% for the Class C Notes, 20.35% for the Class D Notes and 4.25% for the Class E Notes. Credit enhancement consists of excess spread, overcollateralization, subordination (except for the Class E Notes) and a reserve account and a note interest reserve account funded at closing. This note interest reserve account can be used to cover payment shortfalls for the Class A, Class B, Class C, and Class D Notes. Bridgecrest Credit Company ("Bridgecrest"), is an affiliate of DriveTime and will be the primary servicer of the securitization.
KBRA applied its Global Auto Loan ABS Methodology and Global Structured Finance Counterparty Methodology as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and Carvana’s historical static pool data as well as publicly available static pool loss data for comparable auto loan originators. KBRA also conducted an operational assessment on the originator and servicer, as well as a review of the transaction’s legal structure and transaction documents. KBRA reviewed the operative agreements and legal opinions for the transaction prior to closing.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodologies (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
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