Arivo Acceptance, a two-year-old specialty-finance auto lender, is launching its debut securitization of subprime and non-prime loans for new and used cars, trucks and SUVs.
The $165.9 million ARIVO 2019-1, features three classes of notes, including a $141.7 million Class A tranche with preliminary single-A ratings from Morningstar Inc.’s DBRS.
The Class A notes have 16.25% credit enhancement supported by a 0.75% overcollateralization of pool assets, a 1% reserve account, and 14.5% subordination.
The weighted average FICO of the pool is 594.
The total principal balance of the 7,764 loans is $147.2 million, and the transaction includes a $20 million pre-funding account that will be used to purchase additional loans to the pool during a 60-day period after the close of the deal.
Used vehicles make up 78.6% of the pool, totaling $115.6 million in loan principal. The average principal balance is $18.96 million, with a weighted average APR of 16.4% (ranging from 9.09%-28.1%). The average original term is 70.74 months.
DBRS says Arivo’s loss performance in loan originations is limited, requiring DBRS to apply proxy data to determine an expected cumulative net loss of 9% for the pool.
Arivo, of Sandy, Utah, is an entity of Ken Garff Enterprises and Affiliated Cos. (KGE), a set of companies operated by the family of the late Kendall Day Garff, a Salt Lake City businessman and auto dealer who founded the Ken Garff Automotive Group conglomerate.
Arivo financed indirect loans through 1,800 dealerships in 11 Western and Southwestern states.