8-K: America's Car-Mart Finalizes $300 Million Securitization Deal, Achieves Lower Coupon Rates
Summary
- America's Car-Mart completed a securitization transaction on October 9, 2024, issuing $300 million in asset-backed notes.
- The transaction included $228.23 million of Class A Notes with a 6.06% coupon and $71.77 million of Class B Notes with a 9.21% coupon.
- The weighted average coupon for the transaction was 7.44%, a 198 basis point improvement compared to a previous transaction in January 2024.
- The notes are collateralized by $507.2 million of accounts receivables related to installment sale contracts.
- Net proceeds from the offering were approximately $297.9 million, which will be used to pay outstanding debt and fund reserve accounts.
- The Class A Notes are rated A (sf) and the Class B Notes are rated BBB (sf) by S&P Global Rating Agency.
- The Class A Notes mature on February 20, 2029, and the Class B Notes mature on August 20, 2031.
Sentiment
Score: 8
Explanation: The document conveys a positive sentiment due to the successful completion of the securitization and the improved coupon rate. The transaction is presented as a positive step for the company's financial health.
Positives
- The company secured a lower weighted average coupon of 7.44% compared to the 9.42% from the January 2024 transaction, indicating improved market conditions or investor confidence.
- The securitization provides $297.9 million in net proceeds, which will be used to pay down debt and fund reserve accounts, strengthening the company's financial position.
- The Class A Notes received an A (sf) rating and the Class B Notes received a BBB (sf) rating from S&P, reflecting a solid credit profile.
Risks
- The notes are not obligations of or guaranteed by America's Car-Mart or any of its other affiliates or subsidiaries, meaning the Issuer is the sole obligor.
- The notes are subject to events of default, including failure to make required payments or specified bankruptcy-related events, which could lead to acceleration of the debt.
- The notes were sold in a private offering to Qualified Institutional Buyers, limiting the pool of potential investors.
Future Outlook
The document does not contain specific forward-looking statements beyond the details of the securitization transaction itself.
Management Comments
- We are pleased with the successful completion of our second term securitization of 2024, with benchmark rate and spread improvements resulting in a 198 basis point improvement in the weighted average coupon compared to our January 2024 transaction, said Vickie Judy, Chief Financial Officer.
Industry Context
This securitization is a common financing method for auto lenders, allowing them to convert loan receivables into cash. The improved coupon rate suggests a favorable market reception for the company's debt.
Comparison to Industry Standards
- The 7.44% weighted average coupon is a significant improvement over the 9.42% from the January 2024 transaction, indicating a positive shift in market conditions or investor perception of America's Car-Mart.
- The advance rate of 59.15% is within the typical range for auto loan securitizations, but the specific rate depends on the credit quality of the underlying loans and the structure of the deal.
- The A (sf) and BBB (sf) ratings for the Class A and Class B notes, respectively, are consistent with the ratings of similar asset-backed securities, reflecting the credit quality of the underlying receivables and the credit enhancement mechanisms in place.
- Comparable companies such as Credit Acceptance Corporation and regional auto lenders also utilize securitization to fund their operations, and the terms of this deal are likely to be compared to their recent transactions.
Stakeholder Impact
- Shareholders will benefit from the improved financial position of the company due to the debt reduction and funding of reserve accounts.
- Creditors will be paid down with the net proceeds of the transaction.
- Customers will not be directly impacted by this transaction.
Next Steps
- The company will use the net proceeds to pay down outstanding debt and make initial deposits into collection and reserve accounts.
- The Servicer will be responsible for servicing the receivables and will receive a monthly service fee.
- The Issuer will pay interest and principal on the Notes monthly, starting on November 20, 2024.
Key Dates
- 2024-10-09: Date of the securitization transaction and related agreements.
- 2024-10-11: Date of the press release announcing the securitization transaction.
- 2024-11-20: First payment date for interest and principal on the notes.
- 2029-02-20: Maturity date for the Class A Notes.
- 2031-08-20: Maturity date for the Class B Notes.
Keywords
Filings with Classifications
Beneficial Ownership Statement
- The purchase of company stock by a Chief Financial Officer is generally viewed as a positive signal, indicating management's belief that the stock is undervalued or that the company's future performance will be strong.
Quarterly and Annual Results
- On May 29, 2025, Car-Mart completed a term securitization transaction involving the issuance of $216 million of asset-backed notes.
- The securitization achieved an overall weighted average life adjusted coupon of 6.27%, which improved by 22 basis points compared to the Company's January 2025 issuance and by 117 basis points from the October 2024 securitization transaction.
- Net proceeds from the securitization were used to pay down the outstanding balance on the Company's revolving line of credit.
- The Company continues to explore options to diversify and expand its financing sources, such as potential warehouse lines of credit and the issuance of longer-term debt securities.
Quarterly and Annual Results
- Diluted EPS for FY25 turned profitable at $2.33, compared to a significant loss of $4.92 in FY24, indicating a strong financial recovery.
- Q4 FY25 diluted EPS significantly increased to $1.26 from $0.06 in Q4 FY24, demonstrating strong quarterly performance.
- Gross margin percentage improved by 200 basis points for the full year and 90 basis points for Q4, reflecting effective cost and pricing strategies.
- Net charge-offs as a percentage of average finance receivables improved for both Q4 and the full year, signaling better credit quality and risk management.
- The allowance for credit losses improved to 23.25% at April 30, 2025, from 25.32% a year prior, indicating a healthier loan portfolio.
Insider Transaction Report
- The document details planned significant sales of common stock by a Director and 10% owner, Adam K. Peterson, and his affiliated entities.
- A total of 154,269 shares are planned to be sold, representing approximately 9.75% of their prior beneficial ownership.
- Such a substantial planned reduction in holdings by a key insider is generally perceived as a negative signal by the market.
Securitization Announcement
- The weighted average coupon of 6.27% is lower than previous issuances (22 basis points better than January 2025 and 107 basis points better than October 2024), indicating more favorable financing terms for the Company.
Securitization Announcement
- The Company completed a term securitization transaction, issuing $216 million in principal amount of asset-backed notes.
- Net proceeds of approximately $214.5 million were generated from the offering.
- The proceeds are being used to pay outstanding debt and make initial deposits into collection and reserve accounts.
Quarterly Report
- The company reported diluted earnings per share of $0.37 compared to a loss per share of $1.34 in the same quarter last year.
- Gross margin percentage improved by 150 basis points to 35.7%.
- Net charge-offs as a percentage of average finance receivables improved to 6.1% compared to 6.8%.
Quarterly Report
- On September 20, 2024, the Company completed an underwritten public offering of 1,700,000 shares of its common stock at a price per share of $43.00.
- The net proceeds of the public offering were approximately $68.2 million after deducting the underwriting discount and offering costs of approximately $4.9 million.
- On October 22, 2024, the Company completed the sale of an additional 138,272 shares of common stock at a price of $43.00 per share, in connection with a partial exercise by the underwriter of an option.
- The net proceeds to the Company of the underwriters partial exercise of the Over-Allotment Option were approximately $5.6 million after deducting the underwriting discount and offering costs of approximately $346,000.
- The Company used the net proceeds from this offering to pay down a portion of the Companys revolving line of credit.
Quarterly Report
- The company reported an 8.7% increase in total revenue, reaching $325.7 million for the third quarter of fiscal year 2025.
- Sales volumes rose by 13.2% to 13,198 units, indicating strong sales performance.
- The company's gross margin percentage improved by 150 basis points to 35.7%, driven by better vehicle procurement and disposal strategies.
- Diluted earnings per share were $0.37, a significant improvement compared to a loss of $1.34 per share in the same quarter of the previous year.
Securitization Announcement
- The weighted average coupon improved by 95 basis points compared to the October 2024 securitization.
Quarterly Report
- The company completed a public offering of 1,700,000 shares of its common stock at a price of $43.00 per share, raising net proceeds of $68.2 million.
- The company also sold an additional 138,272 shares through the partial exercise of an over-allotment option, raising an additional $5.6 million.
- The net proceeds from the offering were used to pay down a portion of the company's revolving line of credit.
Quarterly Report
- The company's net income of $5.1 million is a significant improvement compared to a net loss of $27.5 million in the same quarter of the previous year.
- The company's gross margin improved to 39.4% of sales, including a 2.9% benefit from a change in service contract revenue recognition.
- The provision for credit losses decreased by 26.5% to $99.5 million.
Quarterly Report
- The company completed an underwritten public equity offering, resulting in net proceeds of $73.8 million.
- The company also completed a private asset-backed securitization offering, resulting in net proceeds of $297.9 million.
- The proceeds from these offerings were primarily used to pay down existing debt.
Quarterly Report
- The company reported a significant improvement in diluted earnings per share, moving from a loss to a profit.
- Gross margin improved, both including and excluding the impact of the service contract accounting change.
- Net charge-offs as a percentage of average finance receivables decreased, indicating better loan performance.
Capital Raise Update
- The company initially sold 1,700,000 shares at $43.00 per share, generating $67.8 million in net proceeds.
- The underwriters partially exercised their over-allotment option, purchasing 138,272 additional shares at $43.00 per share, resulting in an additional $5.6 million in net proceeds.
Securitization Announcement
- The weighted average coupon rate of 7.44% is a 198 basis point improvement compared to the January 2024 transaction, indicating better terms for the company.
Public Offering Announcement
- The company is raising capital through a public offering of 1,700,000 shares of common stock.
- The underwriters have an option to purchase an additional 255,000 shares.
- The company expects to receive approximately $67.8 million in net proceeds from the offering.
Loan Agreement Amendment
- The company is required to complete a junior capital raise of $50 million or more.
- The net proceeds of the capital raise must be used to pay down the outstanding principal balance of the line of credit.
- A fee of 0.10% of the total permitted borrowings will be charged if the capital raise is not completed by October 31, 2024.
Loan Agreement Amendment
- The reduction in the credit line and the imposition of minimum availability requirements suggest a tightening of financial conditions for the company.
- The requirement to complete a capital raise by a specific date to avoid a fee indicates potential financial pressure.
Quarterly Report
- The company's net loss of $964,000 is worse than the net income of $4.2 million in the same period last year.
- The decrease in revenue by 5.2% is worse than the prior year period.
- The increase in the provision for credit losses as a percentage of sales to 33.2% is worse than the 31.0% in the prior year period.
Quarterly Report
- The amendment to the revolving credit agreement requires the company to use the net proceeds of any junior capital raise of $50 million or more to pay down the outstanding principal balance of the line of credit.
- The company will pay a fee to the lenders of 0.10% of the total permitted borrowings under the line of credit if the company has not completed such a capital raise by October 31, 2024.
Quarterly Report
- The company reported a net loss per share of $0.15 compared to a diluted earnings per share of $0.63 in the same quarter last year.
- Revenue decreased by 5.2% year-over-year.
- Net charge-offs as a percentage of average finance receivables increased to 6.4% from 5.8%.
Proxy Statement
- The company reported a net loss of $31.4 million compared to the prior year's net income.
- Revenues decreased 0.5% over fiscal 2023, driven by a 8.8% retail unit volume decrease and a 0.1% decrease in customer count.
Annual Results
- The company's net income decreased from a profit of $20.4 million to a loss of $31.4 million.
- The provision for credit losses increased significantly to 36.5% of sales.
- Retail unit sales decreased by 8.8%.
Quarterly Report
- The company reported a loss per share for the full year, compared to a profit in the previous year.
- Revenue decreased both for the quarter and the full year.
- Net charge-offs as a percentage of average finance receivables increased.
- Interest expense increased significantly.
Quarterly Report
- The company reported a net loss of $8.5 million for the quarter, compared to a net income of $1.5 million in the same period last year.
- Total revenue decreased by 7.9% year-over-year, driven by a decline in retail unit sales.
- The provision for credit losses increased to 37.3% of sales, up from 31.2% in the prior year's quarter.
Quarterly Report
- The company reported a loss per share of $1.34 compared to earnings per share of $0.23 in the same quarter last year.
- Total revenue decreased by 7.9% year-over-year.
- Retail units sold decreased by 19.6% compared to the prior year quarter.
Loan Agreement Amendment
- The reduction in the total borrowing capacity from $600 million to $340 million is a negative development.
- The increase in the unused line fee rate to 0.50% for low utilization is a negative development.
- The removal of pricing tiers for interest rates may result in higher borrowing costs.
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