Kroll Rates CarNow

By Staff Writer June 29, 2020

Kroll Bond Rating Agency assigns preliminary ratings to five classes of notes issued by CarNow Auto Receivables Trust 2020-1, a subprime auto asset-backed securities transaction.

The impact of COVID-19 has resulted in an economic slowdown and high unemployment, which is expected to adversely impact the performance of auto loans, including those supporting the subject transaction. Owing to this risk, KBRA increased its base case default assumptions for the subject pool. The review did not result in Watch Placements on any outstanding ratings from KBRA rated CNART transactions. Due to the impact of COVID-19 on the economy, KBRA also used lower recovery rates and a longer recovery lag assumption on defaulted loans.

CarNow Auto Receivables Trust 2020-1 will issue five classes of notes totaling $118.73 million that are collateralized by a pool of retail automobile contracts, made to subprime obligors that are secured by used automobiles.

The structure and collateral for CNART 2020-1 are generally similar with the previous CNART 2019-1 transaction. However, key structural differences from the prior deal include the addition of one class of notes (Class E), higher enhancement for all classes, a 0.50 percent increase to the reserve and no prefunding. In addition, CNART 2020-1 excludes loans that have been granted COVID related deferrals as of the cut-off date. The transaction has initial credit enhancement levels ranging from 56.81 percent for the Class A notes to 21.80 percent for the Class E notes. The target enhancement levels for the Class A notes and Class E notes are 68.25 percent and 33.25 percent, respectively.

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Last modified on Monday, 29 June 2020 14:02

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