Non-prime auto ABS market clears record $716.88 million CPS securitization with full ratings coverage
The non-prime auto loan securitization market cleared a record transaction on July 22, with demand from qualified institutional buyers absorbing all five classes of notes. Consumer Portfolio Services (Nasdaq: CPSS), the Las Vegas…
Key takeaways
- Consumer Portfolio Services (Nasdaq: CPSS) priced $716.88 million in asset-backed notes on July 22 against a $734.51 million collateral pool, the largest securitization in the company's history.
- The CPS Auto Receivables Trust 2026-C deal had all five note classes absorbed by qualified institutional buyers at a weighted average coupon of approximately 5.90%.
- Class A notes totaling $317.3 million priced at 4.52% and earned triple-A ratings from both S&P and DBRS Morningstar, while Class E notes priced at 7.65% with only a BB rating from DBRS Morningstar.
- This is the 60th senior subordinate securitization CPS has completed since 2011 and its 43rd consecutive deal with at least two agencies awarding triple-A on the senior class.
- Credit enhancement at closing consisted of a 1.00% cash deposit against the original pool balance and 2.40% overcollateralization.
The non-prime auto loan securitization market cleared a record transaction on July 22, with demand from qualified institutional buyers absorbing all five classes of notes. Consumer Portfolio Services (Nasdaq: CPSS), the Las Vegas specialty finance company, priced $716.88 million in asset-backed notes against a collateral pool of $734.51 million in automobile receivables, completing its third term securitization of 2026 and the largest deal in its history.
How the capital stack was priced
The five-class structure of CPS Auto Receivables Trust 2026-C reflects current institutional pricing for non-prime auto risk. Class A notes totaling $317.3 million, with a 0.65-year average life, priced at 4.52% and earned triple-A ratings from both Standard & Poor's and DBRS Morningstar. The weighted average coupon across all five classes came to approximately 5.90%.
At the other end of the stack, $105.04 million in Class E notes priced at 7.65% with a 4.03-year average life, drawing a BB rating from DBRS Morningstar. S&P did not rate that class. Classes B through D priced between 4.84% and 5.72%, each receiving investment-grade ratings from both agencies.
Credit enhancement at closing consisted of a 1.00% cash deposit against the original pool balance and 2.40% overcollateralization. The trust structure requires accelerated principal repayment until overcollateralization reaches the lesser of 7.70% of the original pool or 19.10% of the then-current outstanding balance.
A consecutive ratings run that supports the pricing
This is the 60th senior subordinate securitization CPS has completed since the beginning of 2011, and the 43rd consecutive deal in which at least two agencies awarded a triple-A on the senior class. S&P and DBRS Morningstar based their ratings on the transaction structure, historical performance of comparable receivables, and CPS's track record as servicer. The unbroken streak is the operational argument behind the senior notes pricing where they did.
The rate and credit read-through
CPS buys retail installment sales contracts primarily from franchised automobile dealerships, secured by late-model used vehicles. Its borrower base consists of individuals with past credit problems or limited credit histories. The company funds those contract purchases through the securitization markets on a long-term basis and services them over their lives.
Clearing a record deal size at a weighted average coupon of approximately 5.90% reflects institutional buyers' current assessment of adequate compensation for non-prime risk. That assessment rests on two variables: employment conditions, which drive payment rates in this borrower segment, and used-vehicle prices, which set the collateral floor. The next deal will test whether both hold.
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