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AmeriCredit Announces $500 million Securitization
Fort Worth-based AmeriCredit announced this week that it had successfully issued $500 million in securities backed by subprime car loans.
Securitization differs from the one announced in May
Here at Auto Credit Express, it seems like the only news lately has been bad news. So this week’s news from AmeriCredit was a welcome change.
The good news for the subprime car market is that the successful securitization of these loans means that AmeriCredit will continue to have the capacity to make new loans, even in today’s dismal credit market. There is, however, a downside to the good news.
Unlike the securitization that AmeriCredit completed this past May, the new securities came at a higher interest rate. In May, the lender was able to secure a 6% rate on a $750 million securitization. With the current transaction, AmeriCredit will have to pay an average of 7.3% on $375 million of class A notes (thru Deutsche Bank) and an average of 11.2% on the remaining notes (thru Wachovia) that have a lower credit rating.
What this means to dealers
In the near term, car dealers can expect AmeriCredit to continue to be active in the subprime lending sector. The increased costs of securitization, however, will have an effect. According to AmeriCredit spokesperson Caitlin DeYoung, “That translates into potentially higher APRs on loans we would make to customers.” She went on to say that, “AmeriCredit has also been originating fewer loans because of the uncertainty in financial markets, which means fewer loans for would-be car buyers.”