Consumer Portfolio Services, Inc. (NASDAQ:CPSS) recently closed a $50 million securitization of residual interests from its previous securitizations. This specialty finance company focuses on providing indirect automobile financing to individuals with limited credit histories or past credit problems. Their business model involves purchasing retail installment sales contracts from franchised automobile dealerships, mainly secured by late model used vehicles.
The recent transaction involved the sale of asset-backed notes to a qualified institutional buyer, 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 for the notes includes 80% of the funds in the spread accounts and over-collateralization from each related securitization.
It’s important to note that this deal was conducted as a private offering and was not registered under the Securities Act of 1933 or any state securities laws. The purpose of this transaction was to secure financing for CPS’s auto financing business while maintaining a minimum collateral ratio through monthly interest and potential principal payments.
The announcement of this securitization comes after the deal’s completion and serves as a record-keeping measure for the company. Consumer Portfolio Services, Inc. continues to engage in the securitization markets to support its core business, reflecting a strategic financial maneuver to ensure the availability of funds for their operations.
Consumer Portfolio Services, Inc.’s recent securitization of residual interests demonstrates their commitment to leveraging financial markets to sustain their auto financing business. This maneuver not only provides the necessary funding but also showcases the company’s ability to navigate complex financial transactions in a competitive industry. With a focus on providing financing to individuals with credit challenges, CPS plays a vital role in facilitating access to vehicle ownership for a broader consumer base. This financial move aligns with the company’s overarching mission and underscores their strategic approach to business growth and sustainability.