KBRA Assigns Preliminary Ratings to ACC Trust 2018-1

NEW YORK--()--Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes totaling $212.6 million issued by ACC Trust 2018-1 (“ACC 2018-1”).

This transaction is RAC King, LLC’s (the “Company”) inaugural sub-prime automobile closed-end lease securitization. The primary asset of ACC Trust 2018-1 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 44.85% for the Class A notes, to 23.25% for the Class C notes. The target enhancement levels for the Class A notes and Class C notes are 49.60% and 28.00%, 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 $270 million and an undiscounted residual value of $69.2 million, which is approximately 25.6% of the aggregate Securitization Value.

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 Company’s 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 March 31, 2018, had 481 employees and operated 32 retail locations located in six 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 transaction’s underlying collateral pool and the proposed capital structure. KBRA also conducted an operational assessment of the Company, as well as a review of the transaction’s legal structure and transaction documents. KBRA will review the operative agreements and legal opinions for the transaction prior to closing.

             
Class     Preliminary Rating     Principal Balance
A     A (sf)     $154,286,000
B     BBB (sf)     $31,721,000
C     BB (sf)     $26,592,000
       

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report available 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 recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and 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.

Contacts

Analytical:
Kroll Bond Rating Agency
Eric Neglia, 646-731-2456
Managing Director
eneglia@kbra.com
or
Jenny Ovalle, 646-731-2309
Director
jovalle@kbra.com
or
Andrew Silverhardt, 646-731-2492
Senior Analyst
asilverhardt@kbra.com
or
Rosemary Kelley, 646-731-2337
Senior Managing Director
rkelley@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
Eric Neglia, 646-731-2456
Managing Director
eneglia@kbra.com
or
Jenny Ovalle, 646-731-2309
Director
jovalle@kbra.com
or
Andrew Silverhardt, 646-731-2492
Senior Analyst
asilverhardt@kbra.com
or
Rosemary Kelley, 646-731-2337
Senior Managing Director
rkelley@kbra.com