Arra Finance closes inaugural auto ABS transaction
What's the deal? Arra FinanceDealroom has a profile for this one. Try Dealroom →, a Texas-based nonprime auto lender, has closed its inaugural asset-backed securitisation, bundling auto loans into rated securities sold to institutional investors.
The private 4(a)(2) offering carried ratings from AA through BB-. A fund managed by Obra CapitalDealroom has a profile for this one. Try Dealroom → — Arra's parent — co-sponsored the deal, with Goldman SachsDealroom has a profile for this one. Try Dealroom → as sole structuring agent.
The securitisation is backed by Arra's portfolio of more than $700 million in auto receivables.
Why now? Arra has scaled fast, building its platform in under two years and acquiring Crescent Bank's auto finance assets along the way.
The first rated transaction diversifies Arra's funding base and opens up capital markets capacity for a steady ABS issuance program. The company says it is already eyeing a more widely syndicated deal next.
"Today's success validates the capital markets thesis we have held since day one," said Steven Lackowski, chief financial officer of Arra Finance.
What could go wrong? Nonprime lending serves borrowers with weaker credit, so performance depends on disciplined underwriting and high-touch servicing — both areas Arra leans on to keep its loan book healthy.
A downturn or rising defaults would test that portfolio, and investor appetite for nonprime paper can cool quickly when conditions tighten.
The signal: Securitisation is how lenders recycle capital to fund more loans, and Arra's first rated deal — co-sponsored by parent Obra Capital with Goldman Sachs as structuring agent — marks its arrival as a recognised player in nonprime auto finance. For an early-stage lender that built its platform in under two years and absorbed Crescent Bank's auto finance assets, plugging into capital markets signals momentum, with bigger, more syndicated issuances flagged as next.
Read more: Business Insider
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