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3. Securitization Trust Debt

9 Months Ended

Sep. 30, 2019

(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:

		Final Scheduled Payment	Receivables Pledged at September 30,		Initial		Outstanding Principal at September 30,		Outstanding Principal at December 31,		Weighted Average Contractual Interest Rate at September 30,
Series		Date (1)	2019 (2)		Principal		2019		2018		2019
		(Dollars in thousands)
	CPS 2014-A	June 2021		–		180,000		–		15,328		–
	CPS 2014-B	September 2021		–		202,500		–		24,051		–
	CPS 2014-C	December 2021		24,989		273,000		23,997		40,896		5.04%
	CPS 2014-D	March 2022		28,979		267,500		28,550		46,489		5.33%
	CPS 2015-A	June 2022		34,107		245,000		32,069		52,448		5.09%
	CPS 2015-B	September 2022		41,879		250,000		42,412		64,591		4.97%
	CPS 2015-C	December 2022		61,129		300,000		61,648		90,639		5.59%
	CPS 2016-A	March 2023		80,790		329,460		81,833		119,444		5.82%
	CPS 2016-B	June 2023		96,470		332,690		94,181		135,688		6.13%
	CPS 2016-C	September 2023		96,780		318,500		94,589		136,114		6.06%
	CPS 2016-D	April 2024		75,637		206,325		74,176		104,645		4.51%
	CPS 2017-A	April 2024		83,017		206,320		80,887		113,527		4.61%
	CPS 2017-B	December 2023		100,865		225,170		87,633		127,726		3.96%
	CPS 2017-C	September 2024		102,834		224,825		91,654		131,845		3.88%
	CPS 2017-D	June 2024		104,368		196,300		95,003		132,919		3.55%
	CPS 2018-A	March 2025		112,179		190,000		103,008		142,643		3.50%
	CPS 2018-B	December 2024		131,373		201,823		124,822		167,809		3.87%
	CPS 2018-C	September 2025		157,848		230,275		148,605		204,418		3.94%
	CPS 2018-D	June 2025		183,774		233,730		169,869		224,189		3.95%
	CPS 2019-A	March 2026		222,685		254,400		206,977		–		3.87%
	CPS 2019-B	June 2026		209,982		228,275		202,163		–		3.52%
	CPS 2019-C	December 2026		237,068		243,513		234,315		–		2.98%
			$	2,186,753	$	5,339,606	$	2,078,391	$	2,075,409

	(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 $214.6 million in 2019, $743.3 million in 2020, $523.0 million in 2021, $312.6 million in 2022, $216.5 million in 2023, $43.6 million in 2024, $13.0 million in 2025.
	(2)	Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet.

Debt issuance costs of $11.9 million and $11.8 million as of September 30, 2019 and December 31, 2018, 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 September 30, 2019, 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 September 30, 2019, restricted cash under the various agreements totaled approximately $128.6 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 October 16, 2019 we completed our fourth securitization transaction of 2019. In the transaction, qualified institutional buyers purchased $274.3 million of asset-backed notes secured by $275 million in automobile receivables purchased by us. The sold notes, issued by CPS Auto Receivables Trust 2019-D, consist of six classes. Ratings of the notes were provided by Standard & Poor’s and Kroll Bond Rating Agency, 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 2.95%.