KBRA Assigns Preliminary Ratings to ACC Trust 2019-1

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes totaling $174.5 million issued by ACC Trust 2019-1 (ACC 2019-1).

This transaction is RAC King, LLCs (the Company) second sub-prime automobile closed-end lease securitization. The primary asset of ACC Trust 2019-1 will consist of the i) SUBI certificate, which represents the beneficial interest in the specified closed-end leases of the titling trust, ii) the specified vehicles and related assets, including the right to receive payments under the leases, iii) the amounts realized from sales of the specified vehicles and iv) amounts in certain trust accounts, including the reserve account. Credit enhancement for the Notes consists of i) overcollateralization ii) subordination (in the case of Class A and Class B Notes) iii) excess spread and iv) a reserve account. The transaction has initial credit enhancement levels ranging from 42.50% for the Class A notes, to 22.45% for the Class C notes. The target enhancement levels for the Class A notes and Class C notes are 47.25% and 27.200%, respectively. As of the cutoff date, and using a discount rate of 19.00%, the specified pool of leases has an aggregate Securitization Value of $219.4 million and an undiscounted residual value of $48.1 million, which is approximately 21.94% of the aggregate Securitization Value.

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The Company owns 100% of RAC Dealership, LLC (dba American Car Center (ACC) and RAC Intermediate Holding, LLC, which owns 100% of RAC Servicer, LLC (Servicer) and RAC Asset Holdings, LLC (dba American Financial (AFI). The organization began operation in 2000. The Company, through its affiliates, is an integrated used vehicle retailer that focuses on both the sale and financing of low-mileage vehicles to subprime customers through vehicle lease agreements. The Companys business model controls the entire sale and financing process consisting of vehicle acquisition, reconditioning, sales, leasing, underwriting, lease servicing and after-sale support. The Company is headquartered in Memphis, Tennessee and as of December 31, 2018, had 672 employees and operated 45 retail locations located in seven states in the Southeast United States.

KBRA applied its Global General Rating Methodology for Asset-Backed Securities and also referenced the Global Auto Loan ABS Rating Methodology as part of its analysis of the transactions underlying collateral pool and the proposed capital structure. KBRA also conducted an operational assessment of the Company, as well as a review of the transactions legal structure and transaction documents. KBRA will review the operative agreements and legal opinions for the transaction prior to closing.

Preliminary Ratings Assigned: ACC 2019-1

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Class     Preliminary Rating     Principal Balance
A     A (sf)     $130,529,000
B     BBB (sf)     $27,203,000
C     BB (sf)     $16,782,000
       

To access the ratings, pre-sale report and disclosures, click here.

Related Publications: (available at www.kbra.com)

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. 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, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Analytical:
Eric Neglia,
Managing Director
(646) 731-2456
[email protected]

Jenny Ovalle, Director
(646) 731-2309
[email protected]

Andrew Silverhardt, Senior Analyst
(646) 731-2492
[email protected]

Rosemary Kelley, Senior Managing Director
(646) 731-2337
[email protected]

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