Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to eight classes of notes issued by Carvana Auto Receivables Trust 2021-P1 ("CRVNA 2021-P1"), an auto loan ABS transaction.
CRVNA 2021-P1 represents the first term ABS securitization for Carvana LLC ("Carvana" or the "Company") in 2021, the second under its prime shelf, and the seventh overall. CRVNA 2021-P1 will issue eight classes of notes totaling $432.0 million. The transaction is collateralized by approximately $415 million of automobile loans to primarily prime obligors as defined by the Company.
In 2012, DriveTime Automotive Group Inc. ("DriveTime") launched Carvana, an eCommerce platform for buying used vehicles. Carvana, through its website (www.Carvana.com), offers a unique used vehicle buying experience that enables customers to purchase vehicles online through an efficient and transparent process. Carvana's target customer demographic is not specific to credit and is geared to attract a broader credit spectrum and income classification than that of DriveTime. Initially launched in Atlanta, Georgia, Carvana has expanded nationally and is now operating in 266 markets. Carvana’s business and operations fully integrate all steps of the vehicle purchase process including vehicle acquisition, trade-in, financing, and delivery.
The financial impact of COVID-19 has resulted in an economic slowdown and high unemployment, which can adversely impact the performance of the subject pool and auto loans in general. In considering this risk, KBRA applied additional stress scenarios by increasing its expected base case gross charge-off assumptions for this transaction. The assumption increase was derived from KBRA’s analysis of the relationship between the historical unemployment rate and annualized gross loss rates through the 2008-2009 financial crisis for different types of lending products.
KBRA applied its Global Auto Loan ABS Methodology and Global Structured Finance Counterparty Methodology as part of its analysis of the transaction’s underlying collateral pool, the proposed capital structure and Carvana’s historical static pool data as well as publicly available static pool loss data for comparable auto loan originators. KBRA also conducted an operational assessment on the originator and servicer, as well as a review of the transaction’s legal structure and transaction documents. KBRA will review the operative agreements and legal opinions for the transaction prior to closing.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.
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Alla Mikhalevsky, CFA, Director (Lead Analyst)
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Pritam Patel, Associate
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Eric Neglia, Senior Managing Director
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Rosemary Kelley, Senior Managing Director (Rating Committee Chair)
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Ted Burbage, Managing Director
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