Twenty-One Ratings Raised And 19 Affirmed On Seven Carvana Auto Receivables Trust Prime Auto ABS Transactions
OVERVIEW
- We reviewed seven Carvana Auto Receivables Trust ABS transactions, backed by prime retail auto loan receivables originated by Carvana LLC.
- We raised our ratings on 21 classes and affirmed our ratings on 19 classes from the transactions.
- The rating actions reflect our views regarding the transactions' structure, credit enhancement, future collateral performance and remaining cumulative net loss expectations, among other factors.
TORONTO (S&P Global Ratings) May 30, 2023--S&P Global Ratings today raised its ratings on 21 classes from seven Carvana Auto Receivables Trust (CRVNA) transactions. At the same time, we affirmed our ratings on 19 classes from the same transactions (see ratings list). These transactions are ABS backed by prime retail auto loan receivables. Today's rating actions reflect:
- Each transaction's collateral performance to date (see table 1) and our expectations regarding future collateral performance;
- Our remaining cumulative net loss (CNL) expectations for each transaction (see table 2), the transactions' structures, and credit enhancement levels (see table 3); and
- Other credit factors, including credit stability, payment priorities under various scenarios, and sector- and issuer-specific analyses, and our most recent macroeconomic outlook, which incorporates a baseline forecast for U.S. GDP and unemployment.
Considering all these factors, we believe each note's creditworthiness is
consistent with the raised and affirmed ratings.
The transactions are performing better than our initial expectations. The low
level of delinquencies and extension are credit positive. CRVNA series 2022-P1
and 2022-P2, with fewer months of performance and higher pool factors, are
more exposed to the prevailing adverse economic headwinds and possibly weaker
recovery rates (see table 1).
Based on these factors and taking into consideration our expectation for the
transactions' future performance, we revised and lowered our expected CNLs for
these transactions (see table 2).
Table 1
Collateral performance (%)(i)
Pool 60+ days Current Current Current
Series Mo. factor delinq. Ext. CGL CRR CNL
2020-P1 29 34.06 0.92 0.31 1.58 43.79 0.89
2021-P1 26 38.85 0.87 0.22 1.41 45.66 0.77
2021-P2 23 45.67 0.96 0.29 1.36 42.79 0.78
2021-P3 20 53.77 0.91 0.38 1.27 40.57 0.76
2021-P4 17 57.97 0.77 0.38 1.04 34.88 0.68
2022-P1 14 66.85 0.58 0.30 0.89 36.00 0.57
2022-P2 12 69.78 0.54 0.25 0.68 30.97 0.47
(i) As of the May 2023 distribution date. Mo.--Month. Delinq.—Delinquencies.
CGL--Cumulative gross loss. CRR--Cumulative recovery rate. CNL--Cumulative net
loss. Ext.--Extensions.
Table 2
CNL expectations (%)(i)
Original Previous Revised
lifetime lifetime lifetime
Series CNL exp. CNL exp.(i) CNL exp.(ii)
2020-P1 3.75 [3.50-4.00] 2.25 [2.00-2.50] 1.25
2021-P1 3.60 [3.35-3.85] N/A 1.25
2021-P2 3.60 [3.35-3.85] N/A 1.50
2021-P3 2.75 [2.50-3.00] N/A 1.75
2021-P4 2.75 [2.50-3.00] N/A 1.75
2022-P1 2.75 [2.50-3.00] N/A 2.15
2022-P2 2.75 [2.50-3.00] N/A 2.15
(i)Revised in February 2022 (ii)As of May 2023. CNL exp.--Cumulative net loss
expectations. N/A--Not applicable.
The transactions have sequential principal payment structures that are
expected to increase the credit enhancement for the notes as the pool
amortizes. Each transaction has credit enhancement consisting of
overcollateralization, a non-amortizing reserve account, subordination for the
more senior classes, and excess spread. As of the May 2023 distribution date,
each transaction is at its target overcollateralization level and reserve
level.
The transactions have class N notes that will receive interest and principal
payments from available funds remaining after paying senior fees, interest,
and principal to maintain the overcollateralization for the class A through D
notes. Class N has its own reserve account--the class N reserve account, a
percentage of the initial pool balance funded at closing--which will be used
solely to pay the class N notes, to the extent there are no available funds to
pay interest and principal on the class. Additionally, the class N notes will
not provide enhancement to the senior classes. As of the May 2023 distribution
date, for the series reviewed, CRVNA 2022-P2 was the only series with the
class N notes outstanding, and its reserve is at the specified level of 0.30%
of the initial collateral pool balance.
The raised, and affirmed ratings reflect our view that the total credit
support as a percentage of the amortizing pool balance, as of the collection
period ended April 30, 2023, compared with our expected remaining losses, is
commensurate with the revised ratings (see table 3).
Table 3
Hard credit support (%)(i)
Total hard Current total hard
credit support credit support
Series Class at issuance (% of current)(ii)
2020-P1 A-3 9.90 33.47
2020-P1 A-4 9.90 33.47
2020-P1 B 6.60 23.78
2020-P1 C 2.35 11.30
2020-P1 D 0.50 5.87
2021-P1 A-3 9.42 27.07
2021-P1 A-4 9.42 27.07
2021-P1 B 6.04 18.38
2021-P1 C 2.19 8.46
2021-P1 D 0.50 4.12
2021-P2 A-3 9.70 24.30
2021-P2 A-4 9.70 24.30
2021-P2 B 6.40 17.08
2021-P2 C 2.65 8.87
2021-P2 D 0.50 4.16
2021-P3 A-2 8.15 15.81
2021-P3 A-3 8.15 15.81
2021-P3 A-4 8.15 15.81
2021-P3 B 4.90 9.76
2021-P3 C 1.95 4.28
2021-P3 D 0.50 1.58
2021-P4 A-2 8.25 14.84
2021-P4 A-3 8.25 14.84
2021-P4 A-4 8.25 14.84
2021-P4 B 5.10 9.40
2021-P4 C 2.15 4.31
2021-P4 D 0.50 1.47
2022-P1 A-2 9.85 16.23
2022-P1 A-3 9.85 16.23
2022-P1 A-4 9.85 16.23
2022-P1 B 6.80 11.67
2022-P1 C 3.70 7.03
2022-P1 D 1.30 3.44
2022-P2 A-2 9.50 15.76
2022-P2 A-3 9.50 15.76
2022-P2 A-4 9.50 15.76
2022-P2 B 6.45 11.39
2022-P2 C 3.55 7.24
2022-P2 D 0.50 2.87
2022-P2 N(iii) 0.30 0.43
(i)Calculated as a percentage of the total gross receivable pool balance,
consisting of overcollateralization and a reserve account, and if applicable,
subordination. Excludes excess spread that can also provide additional
enhancement. (ii)As of the May 2023 distribution date (iii)Class N enhancement
consists of a class N reserve account that is 0.30% of the initial pool
balance and will be available solely to pay class N interest and principal.
We analyzed the current hard credit enhancement compared to the remaining
expected CNL for those classes in which hard credit enhancement alone--without
credit to the stressed excess spread--was sufficient, in our opinion, to
upgrade or affirm the ratings. For the other classes, we incorporated a cash
flow analysis to assess the loss coverage level, giving credit to excess
spread. Our various cash flow scenarios included forward-looking assumptions
on recoveries, the timing of losses, and voluntary absolute prepayment speeds
that we believe are appropriate given each transaction's performance to date.
In addition to our break-even cash flow analysis, we also conducted a
sensitivity analysis for the series to determine the impact that a moderate
('BBB') stress scenario would have on our ratings if losses began trending
higher than our revised base-case loss expectation.
In our view, the results demonstrated that all the classes have adequate
credit enhancement at the upgraded or affirmed rating levels, which is based
on our analysis as of the collection period ended April 30, 2023 (May 2023
distribution). We will continue to monitor the transactions' performance to
ensure that the credit enhancement remains sufficient to cover our CNL
expectation under our stress scenarios for each of the rated classes.
RELATED CRITERIA
- Criteria | Structured Finance | ABS: Global Auto ABS Methodology And Assumptions , March 31, 2022
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings , Oct. 10, 2021
- Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities , Dec. 22, 2020
- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation And Special-Purpose Entity Criteria , May 15, 2019
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions , March 8, 2019
- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions , Jan. 30, 2019
- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions , Oct. 9, 2014
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts , May 31, 2012
- General Criteria: Principles Of Credit Ratings , Feb. 16, 2011
- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment , May 28, 2009
RELATED RESEARCH
- U.S. Auto Loan ABS Tracker: March 2023 Performance, May 18, 2023
- Economic Outlook U.S. Q2 2023: Still Resilient, Downside Risks Rise , March 27, 2023
- Research Update: Carvana Co. Downgraded to 'CC' On Proposed Distressed Debt Exchange; Outlook Negative, March 23, 2023
- Presale: Carvana Auto Receivables Trust 2022-P2, May 12, 2022
- Presale: Carvana Auto Receivables Trust 2022-P1, March 21, 2022
- Carvana Auto Receivables Trust 2020-P1 Ratings Raised On Three Classes; Three Affirmed, Feb. 4, 2022
- Presale: Carvana Auto Receivables Trust 2021-P4, Dec. 15, 2021
- Presale: Carvana Auto Receivables Trust 2021-P3, Sept. 16, 2021
- Presale: Carvana Auto Receivables Trust 2021-P2, June 10, 2021
- Presale: Carvana Auto Receivables Trust 2021-P1, March 5, 2021
- Presale: Carvana Auto Receivables Trust 2020-P1, Nov. 30, 2020
RATINGS RAISED
Carvana Auto Receivables Trust
Rating
Series Class To From
2020-P1 C AA (sf) A+ (sf)
2020-P1 D AA- (sf) A- (sf)
2021-P1 B AA+ (sf) AA (sf)
2021-P1 C AA (sf) A (sf)
2021-P1 D AA- (sf) BBB (sf)
2021-P2 B AA+ (sf) AA (sf)
2021-P2 C AA (sf) A (sf)
2021-P2 D AA- (sf) BBB+ (sf)
2021-P3 B AA+ (sf) AA (sf)
2021-P3 C AA- (sf) A (sf)
2021-P3 D A- (sf) BBB (sf)
2021-P4 B AA+ (sf) AA (sf)
2021-P4 C AA- (sf) A (sf)
2021-P4 D A- (sf) BBB (sf)
2022-P1 B AA+ (sf) AA (sf)
2022-P1 C A+ (sf) A (sf)
2022-P1 D BBB+(sf) BBB (sf)
2022-P2 B AA+ (sf) AA (sf)
2022-P2 C A+ (sf) A (sf)
2022-P2 D BBB+ (sf) BBB (sf)
2022-P2 N BBB- (sf) BB- (sf)
RATINGS AFFIRMED
Carvana Auto Receivables Trust
Series Class Rating
2020-P1 A-3 AAA (sf)
2020-P1 A-4 AAA (sf)
2020-P1 B AA+ (sf)
2021-P1 A-3 AAA (sf)
2021-P1 A-4 AAA (sf)
2021-P2 A-3 AAA (sf)
2021-P2 A-4 AAA (sf)
2021-P3 A-2 AAA (sf)
2021-P3 A-3 AAA (sf)
2021-P3 A-4 AAA (sf)
2021-P4 A-2 AAA (sf)
2021-P4 A-3 AAA (sf)
2021-P4 A-4 AAA (sf)
2022-P1 A-2 AAA (sf)
2022-P1 A-3 AAA (sf)
2022-P1 A-4 AAA (sf)
2022-P2 A-2 AAA (sf)
2022-P2 A-3 AAA (sf)
2022-P2 A-4 AAA (sf)
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| Primary Credit Analyst: | Sanjay Narine, CFA, Toronto + 1 (416) 507 2548; sanjay.narine@spglobal.com |
| Secondary Contact: | Frank J Trick, New York + 1 (212) 438 1108; frank.trick@spglobal.com |
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