Credit Acceptance Completes Credit Facility, AmeriCredit Announces Asset-Backed Securitization

SOUTHFIELD, Mich., and FORT WORTH, Texas -- Credit Acceptance Corp. recently announced the completion of a $50-million credit facility, while AmeriCredit announced its 55th asset-backed securitization for $1.2 billion.

Credit Acceptance Corp. said it completed a $50-million credit facility with Variable Funding Capital Co., a multi-seller of commercial paper conduit administered by Wachovia Securities.

Executives explained that prior to this new credit facility, the effective amount the company's special purpose entities could borrow against collateral previously contributed by the company to term securitizations decreased as the related term securitizations amortized.

According to Credit Acceptance, the facility gives the company the opportunity to allow its special purpose entities to utilize more of their borrowing capacity throughout the life of the related term securitization.

The facility was entered into by the company's subsidiary, Credit Acceptance Residual Funding, and will allow that subsidiary to finance its purchase of trust certificates from special purpose entities that purchased loans to dealer-partners under the company's term securitization transactions.

According to executives, historically, the Term SPEs' residual interests in dealer loans represented by trust certificates have proven to have value that increases as their term securitization amortize.

"The new facility enables the Term SPEs to realize and distribute to the company up to 65 percent of that value prior to the time the related term securitization senior notes are paid in full," executives said.

Executives went on to say, "Residual Funding did not make a draw on the facility at closing. The facility matures Sept. 19, 2007 with draws under the facility bearing interest at a floating rate equal to LIBOR or the commercial paper rate 145 basis points."

The company said its contracted relationship with dealer-partners remains unaffected. Residual Funding's interests in dealer loans, represented by its purchased trust certificates, are subordinated to the interests of term securitization senior noteholders, but the entire arrangement is non-recourse to the company, according to executives.

"The dealer-partners' rights to future payments of dealer holdback are preserved and the company will continue to recognize its servicing fee on amounts collected," executives said.

"Without our product, consumers may be unable to purchase a vehicle, or they may purchase an unreliable one, or they may not have the opportunity to improve their credit standing," executives said about their services.

"As we report to the three national credit reporting agencies, a significant number of our customers improve their lives by improving their credit score and move on to more traditional sources of financing," they added.

Also working to make sure business goes smoothly was AmeriCredit, which recently announced the pricing of a $1.2 billion offering of auto receivables-backed securities through lead managers Deutsche Bank Securities, Credit Suisse and UBS Investment Bank. Co-managers include JPMorgan and Lehman Brothers.

AmeriCredit said it uses the net proceeds from these transactions to provide long-term financing of its receivables. The securities are issued in four classes of notes. The weighted average coupon on the notes to be paid by AmeriCredit is 5.2 percent.

Executives highlighted the fact that this transaction represents the company's first securitization where Financial Guaranty Insurance Co. is providing the bond insurance.

"Initial credit enhancement will total 9.5 percent of the original receivable pool balance building to the total required enhancement level of 14 percent of the then outstanding receivable pool balance," executives said. "The initial 9.5 percent enhancement will consist of 2 percent cash and 7.5 percent overcollateralization."

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