XML 22 R11.htm IDEA: XBRL DOCUMENT
v3.22.1

Variable Interest Entities and Securitizations | 3 Months Ended
--- | ---
Mar. 31, 2022
Variable Interest Entity, Measure of Activity [Abstract] |
Variable Interest Entities and Securitizations | 4. Variable Interest Entities and Securitizations A VIE is an entity that either (i) has insufficient equity to finance its activities without additional subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest. The Company consolidates VIEs for which it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. Assets recognized as a result of consolidating VIEs do not represent additional assets that could be used to satisfy claims against the Company's general assets. Liabilities recognized as a result of consolidating VIEs do not represent additional claims on the Company's general assets, rather they represent claims against the specific assets of the consolidated VIEs. The Company has the power to direct significant activities of its VIEs when it has the ability to exercise discretion in the servicing of financial assets or control investment decisions. UACC generally retains a portion of the economic interests in UACC-sponsored asset-backed securitization transactions, which could be retained in the form of a portion of the senior interests, the subordinated interests, residual interests, or servicing rights. UACC has developed a securitization program that involves selling finance receivables to securitization trusts through the private issuance of asset-backed securities which are collateralized by the finance receivables. UACC establishes and sponsors these transactions which create and pass along risks to the variable interest holders, specifically, consumer credit risk and pre-payment risk. The securitization trusts established in connection with asset-backed securitization transactions are VIEs. For each VIE that UACC establishes in its role as sponsor of securitization transactions, it performs an analysis to determine if it is the primary beneficiary of the VIE. For all securitization transactions consummated prior to the Acquisition Date, UACC consolidated VIEs and accounted for the transactions as secured borrowings. UACC is the primary beneficiary of the United Auto Credit 2021-1 and 2020-1 securitization trusts, as it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. These VIEs will continue to be consolidated on the Company's condensed consolidated financial statements. UACC has the power to direct significant activities of the securitization trusts as it has the ability to exercise discretion in the servicing of the related finance receivables. UACC also retained a portion of the economic interests in the 2021-1 and 2020-1 asset-backed securitization transactions, in the form of residual interests in accordance with Regulation RR of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Risk Retention Rules"). The Risk Retention Rules require the Company to retain at least 5% of the beneficial interests issued by the securitization trusts. The VIE model allows for a measurement alternative when a reporting entity elects the fair value option and consolidates a collateralized financing entity (“CFE”). This measurement alternative eliminates the accounting mismatch that may arise from measurement differences between the CFE’s financial assets and third-party financial liabilities in earnings and attributes those earnings to the controlling equity interest in the consolidated income statement. The 2020-1 and 2021-1 securitizations trusts consolidated by UACC meet the definition of a CFE, therefore, the Company has elected to apply the measurement alternative when consolidating these VIEs. Refer to Note 16 - Financial Instruments and Fair Value Measurements for further detail. UACC has three senior secured warehouse credit facilities. Through trusts, UACC entered into warehouse facility agreements with certain banking institutions, primarily to finance the purchase and origination of finance receivables as well as to provide funding for general operating activities. These trusts are secured by eligible finance receivables which are pledged as collateral for the warehouse facilities. These trusts are consolidated VIEs, refer to Note 11 - Warehouse Credit Facilities of Consolidated VIEs for further details on the warehouse facilities. Creditors or beneficial interest holders of VIEs for which the Company is the primary beneficiary generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to the Company. The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the condensed consolidated balance sheets (in thousands):
|  | As of March 31, 2022 |
|  | Securitization Vehicles |
Current Assets: |  |  |
Restricted Cash |  | $ | 25,542 |
Finance Receivables at fair value |  |  | 12,116 |
Total Current Assets |  |  | 37,658 |
Finance Receivables at fair value |  |  | 177,353 |
Total Assets |  | $ | 215,011 |
Current Liabilities: |  |  |
Current portion of securitization debt |  | $ | 138,935 |
Securitization debt, net of current portion |  |  | 65,692 |
Total Liabilities |  | $ | 204,627 |
The Company did not have any consolidated VIEs for the period ended March 31, 2021. On February 16, 2022, UACC sold a pool of finance receivables in the United Auto Credit 2022-1 securitization transaction. UACC retained the servicing rights to these finance receivables and received beneficial interests in the form of subordinated asset-backed securities. UACC owns an insignificant portion of these subordinated securities and receives an at market servicing fee. The securitization trust used to affect this transaction is a VIE that the Company does not consolidate. As the servicer, UACC retained the power to direct the activities that are most significant to the entity, however, UACC concluded that it is not the primary beneficiary of the United Auto Credit 2022-1 securitization trust because its retained interests in the VIEs are insignificant. The beneficial interest retained by UACC included rated notes and unrated residual certificates issued by the 2022-1 securitization trust. UACC has no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in payment or otherwise is in default, except when representations and warranties about the eligibility of the securitized assets are breached, or when certain changes are made to the underlying asset contracts. Securitization investors have no recourse to UACC or its other assets and have no right to require UACC to repurchase the investments. UACC has no obligation to provide liquidity or contribute cash or additional assets to the VIEs and does not guarantee any asset-backed securities. The United Auto Credit 2022-1 securitization transaction qualified for sale accounting and the Company recognized a gain on sale of $29.6 million upon the sale of the finance receivables to the United Auto Credit 2022-1 securitization trust. The net proceeds from the sale consisted of the fair value of the assets obtained as part of the transaction, which included cash of $301.4 million, which is net of transaction expenses and beneficial interests of $16.5 million to comply with Risk Retention Rules. UACC utilized the prices paid by third-party investors to value the beneficial interests retained. The beneficial interests held by UACC are subject to the credit and prepayment risk stemming from the underlying finance receivables. As of March 31, 2022, the assets UACC retains in the unconsolidated VIEs were approximately $15.6 million and are included in "Beneficial interests in securitizations" in the Company's condensed consolidated balance sheet. The beneficial interests in securitizations are subject to restrictions on transfer pursuant to UACC’s obligations as a sponsor under Risk Retention Rules. These securities are interests in securitization trusts, thus there are no contractual maturities. The following table summarizes the amortized cost, the carrying amount, which is the fair value, and the maximum exposure to losses of UACC's assets related to unconsolidated VIEs (in thousands):
|  | As of March 31, 2022 |
|  | Aggregate Principal Balance |  |  | Carrying Value |  |  | Total Exposure |
Rated notes |  | $ | 14,106 |  |  | $ | 13,903 |  |  | $ | 13,903 |
Certificates |  |  | — |  |  |  | 1,700 |  |  |  | 1,700 |
Other assets |  |  | 310 |  |  |  | 310 |  |  |  | 310 |
Total unconsolidated VIEs |  | $ | 14,416 |  |  | $ | 15,913 |  |  | $ | 15,913 |
Total exposure represents the estimated loss UACC would incur under severe, hypothetical circumstances, such as if the value of the interests in the securitization trusts and any associated collateral declined to zero. The Company believes the possibility of this is remote. As such, the total exposure presented above is not an indication of the Company's expected losses.

X
- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 + Details
Name: | us-gaap_VariableInterestEntityDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_VariableInterestEntityMeasureOfActivityAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration