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(3) Securitization Trust Debt

3 Months Ended

Mar. 31, 2021

(3) Securitization Trust Debt

We have completed many securitization transactions that are structured as secured borrowings for financial accounting purposes. The debt issued in these transactions is shown on our Unaudited Condensed Consolidated Balance Sheets as “Securitization trust debt,” and the components of such debt are summarized in the following table:

Series Final Scheduled Payment Date (1) Receivables Pledged at
March 31,
2021 (2) Initial Principal Outstanding Principal at
March 31,
2021 Outstanding Principal at
December 31,
2020 Weighted Average Contractual Interest Rate at
March 31,
2021

(Dollars in thousands)

CPS 2015-B September 2022 $ – $ 250,000 $ – $ 17,984 –

CPS 2015-C December 2022 21,749 300,000 23,929 28,529 6.87%

CPS 2016-A March 2023 28,459 329,460 30,958 37,158 7.65%

CPS 2016-B June 2023 37,418 332,690 38,724 46,079 7.58%

CPS 2016-C September 2023 39,455 318,500 40,046 47,325 7.82%

CPS 2016-D April 2024 32,599 206,325 30,753 36,455 6.05%

CPS 2017-A April 2024 36,408 206,320 34,412 40,619 6.04%

CPS 2017-B December 2023 46,080 225,170 31,951 39,016 5.23%

CPS 2017-C September 2024 48,489 224,825 41,953 47,553 4.95%

CPS 2017-D June 2024 50,010 196,300 43,273 49,297 4.48%

CPS 2018-A March 2025 54,744 190,000 47,230 53,549 4.25%

CPS 2018-B December 2024 65,851 201,823 58,112 66,955 4.65%

CPS 2018-C September 2025 76,364 230,275 68,625 77,345 4.74%

CPS 2018-D June 2025 91,484 233,730 78,446 88,228 4.68%

CPS 2019-A March 2026 115,227 254,400 99,017 114,373 4.50%

CPS 2019-B June 2026 113,420 228,275 105,045 118,982 4.06%

CPS 2019-C September 2026 133,374 243,513 125,430 142,080 3.35%

CPS 2019-D December 2026 168,358 274,313 160,999 181,485 2.88%

CPS 2020-A March 2027 165,519 260,000 163,649 184,944 2.89%

CPS 2020-B June 2027 168,416 202,343 147,587 164,403 3.31%

CPS 2020-C November 2027 223,358 252,200 214,018 231,961 1.75%

CPS 2021-A March 2028 232,317 230,545 218,218 – 0.77%

$ 1,949,099 $ 5,391,007 $ 1,802,375 $ 1,814,320

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(1) The Final Scheduled Payment Date represents final legal maturity of the securitization trust debt. Securitization trust debt is expected to become due and to be paid prior to those dates, based on amortization of the finance receivables pledged to the trusts. Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $642.9 million in 2021, $498.5 million in 2022, $411.9 million in 2023, $100.4 million in 2024, $102.2 million in 2025, $33.7 million in 2026, and $2.0 million in 2027.

(2) Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet.

Debt issuance costs of $10.8 million and $10.6 million as of March 31, 2021 and December 31, 2020, respectively, have been excluded from the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the securitization trust debt on our Unaudited Condensed Consolidated Balance Sheets.

All of the securitization trust debt was sold in private placement transactions to qualified institutional buyers. The debt was issued through our wholly-owned bankruptcy remote subsidiaries and is secured by the assets of such subsidiaries, but not by our other assets.

The terms of the securitization agreements related to the issuance of the securitization trust debt and the warehouse credit facilities require that we meet certain delinquency and credit loss criteria with respect to the pool of receivables, and certain of the agreements require that we maintain minimum levels of liquidity and not exceed maximum leverage levels. As of March 31, 2021, we were in compliance with all such covenants.

We are responsible for the administration and collection of the automobile contracts. The securitization agreements also require certain funds be held in restricted cash accounts to provide additional collateral for the borrowings, to be applied to make payments on the securitization trust debt or as pre-funding proceeds from a term securitization prior to the purchase of additional collateral. As of March 31, 2021, restricted cash under the various agreements totaled approximately $159.4 million. Interest expense on the securitization trust debt consists of the stated rate of interest plus amortization of additional costs of borrowing. Additional costs of borrowing include facility fees, amortization of deferred financing costs and discounts on notes sold. Deferred financing costs and discounts on notes sold related to the securitization trust debt are amortized using a level yield method. Accordingly, the effective cost of the securitization trust debt is greater than the contractual rate of interest disclosed above.

Our wholly-owned bankruptcy remote subsidiaries were formed to facilitate the above asset-backed financing transactions. Similar bankruptcy remote subsidiaries issue the debt outstanding under our credit facilities. Bankruptcy remote refers to a legal structure in which it is expected that the applicable entity would not be included in any bankruptcy filing by its parent or affiliates. All of the assets of these subsidiaries have been pledged as collateral for the related debt. All such transactions, treated as secured financings for accounting and tax purposes, are treated as sales for all other purposes, including legal and bankruptcy purposes. None of the assets of these subsidiaries are available to pay other creditors.

On April 28, 2021 we completed our second securitization transaction of 2021. In the transaction, qualified institutional buyers purchased $240.0 million of asset-backed notes secured by $240.0 million in automobile receivables originated by CPS. The sold notes, issued by CPS Auto Receivables Trust 2021-B, consist of five classes. Ratings of the notes were provided by Moody’s and DBRS Morningstar, and were based on the structure of the transaction, the historical performance of similar receivables and CPS’s experience as a servicer. The weighted average yield on the notes is approximately 1.65%.