Finance Receivables and Obligations Collateralized by Finance Receivables

3 Months Ended

Mar. 31, 2020

Financing Receivable, after Allowance for Credit Loss, Current [Abstract]

Finance Receivables and Obligations Collateralized by Finance Receivables

AFC sells the majority of its U.S. dollar denominated finance receivables on a revolving basis and without recourse to a wholly-owned, bankruptcy remote, consolidated, special purpose subsidiary ("AFC Funding Corporation"), established for the purpose of purchasing AFC's finance receivables. A securitization agreement allows for the revolving sale by AFC Funding Corporation to a group of bank purchasers of undivided interests in certain finance receivables subject to committed liquidity. The agreement expires on January 28, 2022. AFC Funding Corporation had committed liquidity of $1.70 billion for U.S. finance receivables at March 31, 2020.

We also have an agreement for the securitization of Automotive Finance Canada Inc.'s ("AFCI") receivables which expires on January 28, 2022. AFCI's committed facility is provided through a third-party conduit (separate from the U.S. facility) and was C$175 million at March 31, 2020. The receivables sold pursuant to both the U.S. and Canadian securitization agreements are accounted for as secured borrowings.

The following tables present quantitative information about delinquencies, credit loss charge-offs less recoveries ("net credit losses") and components of securitized financial assets and other related assets managed. For purposes of this illustration, delinquent receivables are defined as receivables 31 days or more past due.



	March 31, 2020				Net Credit Losses Three Months Ended March 31, 2020
	Total Amount of:
(in millions)	Receivables		Receivables Delinquent
Floorplan receivables	$	1,939.3	$	23.2	$	11.9
Other loans	15.5		—		—
Total receivables managed	$	1,954.8	$	23.2	$	11.9



	December 31, 2019				Net Credit Losses Three Months Ended March 31, 2019
	Total Amount of:
(in millions)	Receivables		Receivables Delinquent
Floorplan receivables	$	2,099.4	$	28.8	$	7.9
Other loans	15.8		—		—
Total receivables managed	$	2,115.2	$	28.8	$	7.9

The following is a summary of the changes in the allowance for credit losses related to finance receivables (in millions):



	March 31, 2020			March 31, 2019
Allowance for Credit Losses
Balance at beginning of period	$	15.0		$	14.0
Opening balance adjustment for adoption of ASC Topic 326	5.0			—
Provision for credit losses	16.9			8.2
Recoveries	1.9			2.3
Less charge-offs	(13.8		)	(10.2		)
Balance at end of period	$	25.0		$	14.3

As of March 31, 2020 and December 31, 2019, $1,929.9 million and $2,061.6 million, respectively, of finance receivables and a cash reserve of 1 or 3 percent of the obligations collateralized by finance receivables served as security for the obligations collateralized by finance receivables. The amount of the cash reserve depends on circumstances which are set forth in the securitization agreement. Obligations collateralized by finance receivables consisted of the following:



	March 31, 2020			December 31, 2019
Obligations collateralized by finance receivables, gross	$	1,361.4		$	1,474.4
Unamortized securitization issuance costs	(11.5		)	(13.2		)
Obligations collateralized by finance receivables	$	1,349.9		$	1,461.2

Proceeds from the revolving sale of receivables to the bank facilities are used to fund new loans to customers. AFC, AFC Funding Corporation and AFCI must maintain certain financial covenants including, among others, limits on the amount of debt AFC and AFCI can incur, minimum levels of tangible net worth, and other covenants tied to the performance of the finance receivables portfolio. The securitization agreements also incorporate the financial covenants of our Credit Facility. At March 31, 2020, we were in compliance with the covenants in the securitization agreements.