Consumer Portfolio Services, Inc. (NASDAQ:CPSS) recently finalized a $50 million securitization deal involving residual interests from its previous securitizations. The company sold asset-backed notes to a qualified institutional buyer, with the notes secured by an 80% interest in a CPS affiliate. This affiliate holds residual interests in five CPS securitizations issued between January 2022 and January 2023. The collateral backing these notes includes 80% of the funds in the spread accounts and 80% of the over-collateralization from each related securitization.
The term over-collateralization refers to the surplus of the receivables' outstanding principal balance over the associated notes' outstanding principal balance. Investors in these notes will receive monthly interest payments based on the coupon rate, with potential principal payments made to maintain a minimum collateral ratio. It's important to note that this transaction was conducted as a private offering and was not registered under the Securities Act of 1933 or state securities laws.
Consumer Portfolio Services, Inc. specializes in offering indirect automobile financing to individuals with limited credit histories or past credit challenges. The company primarily acquires retail installment sales contracts from franchised automobile dealerships, securing them with late-model used vehicles and, to a lesser extent, new vehicles. CPS leverages the securitization markets to fund these acquisitions and services the contracts throughout their lifespan.
The recent securitization deal underscores CPS's continued involvement in the securitization markets to bolster its auto financing operations. By leveraging residual interests from previous securitizations, the company demonstrates a strategic approach to managing its financial portfolio and optimizing its capital structure. This move aligns with CPS's overarching goal of providing accessible financing options to a broad range of consumers in the automotive sector.
Consumer Portfolio Services, Inc.'s $50 million securitization deal highlights the company's commitment to prudent financial management and sustained market engagement. By leveraging residual interests from previous securitizations, CPS demonstrates a strategic approach to funding its operations and expanding its presence in the auto financing landscape. This transaction not only reinforces the company's financial stability but also underscores its ability to adapt to dynamic market conditions while serving its target consumer base effectively.