DBRS Assigns Provisional Ratings to American Credit Acceptance Receivables Trust 2018-1

DBRS, Inc. (DBRS) assigned provisional ratings to the following classes of notes to be issued by American Credit Acceptance Receivables Trust 2018-1 (ACAR 2018-1):

-- $99,400,000 Class A Notes rated AAA (sf)
-- $29,400,000 Class B Notes rated AA (sf)
-- $50,400,000 Class C Notes rated A (sf)
-- $35,700,000 Class D Notes rated BBB (sf)
-- $22,400,000 Class E Notes rated BB (sf)
-- $14,000,000 Class F Notes rated B (sf)

The ratings are based on DBRS’s review of the following analytical considerations:
-- Transaction capital structure, proposed ratings and form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization, subordination, amounts held in the reserve fund and excess spread. Credit enhancement levels are sufficient to support the DBRS-projected expected cumulative net loss assumption under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the payment of timely interest on a monthly basis and the payment of principal by the legal final maturity date.
-- ACAR 2018-1 provides for Class A, B, C and D coverage multiples that are slightly below the DBRS range of multiples set forth in the criteria for this asset class. DBRS believes that this is warranted, given the magnitude of expected loss and the structural features of the transaction.
-- The capabilities of American Credit Acceptance, LLC (ACA) with regard to originations, underwriting and servicing.
-- DBRS has performed an operational review of ACA and considers the entity to be an acceptable originator and servicer of subprime automobile loan contracts with an acceptable backup servicer.
-- The ACA senior management team has considerable experience, with an average of 18 years in banking, finance and auto finance companies, as well as an average of approximately five years of company tenure.
-- ACA has completed 21 securitizations since 2011, including four transactions in 2017.
-- ACA maintains a strong corporate culture of compliance and a robust compliance department.
-- The credit quality of the collateral and the consistent performance of ACA’s auto loan portfolio.
-- Considerable availability of historical performance data and a history of consistent performance on the ACA portfolio.

The ratings also consider the statistical pool characteristics:
-- The pool is seasoned approximately two months and contains ACA originations from Q1 2013 through Q1 2018.
-- The average remaining life of the collateral pool is approximately 68 months.
-- The weighted-average FICO score of the pool is 545.
-- The legal structure and presence of legal opinions that address the true sale of the assets to the Issuer, the non-consolidation of the special-purpose vehicle with ACA, that the trust has a valid first-priority security interest in the assets and the consistency with DBRS’s “Legal Criteria for U.S. Structured Finance” methodology.

The ACAR 2018-1 transaction represents the 22nd securitization completed by ACA since 2011 and will offer both senior and subordinate rated securities. The receivables securitized in ACAR 2018-1 will be subprime automobile loan contracts secured primarily by used automobiles, light-duty trucks, vans, motorcycles and minivans.

The rating on the Class A Note reflects the 66.00% of initial hard credit enhancement provided by the subordinated notes in the pool, the Reserve Fund (1.50%) and overcollateralization (10.25%). The ratings on the Class B, Class C, Class D, Class E and Class F Notes reflect 55.50%, 37.50%, 24.75%, 16.75% and 11.75% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Retail Auto Loan Securitizations, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.