Breaking down Tricolor Auto’s collapse

Tricolor Auto Acceptance’s chapter 7 bankruptcy filing on Sept. 10 has led to ratings downgrades for the financier and talks of potentially wider implications for the buy here, pay here and subprime markets. The Texas-based buy here, pay here retailer and lender closed its dealerships in tandem with its filing for liquidation. Since then, ratings agencies Kroll Bond Ratings Agency, Moody’s Ratings and S&P Global placed their ratings on Tricolor securitization transactions under watch for potential downgrades. Backup servicer Vervent Inc. is also prepping to takeover servicing of Tricolor’s portfolio. Tricolor’s closure could spark a ripple effect for small subprime lenders, especially after subprime lender Automotive Credit Corp. also indefinitely paused all originations Aug. 7. For floorplan lenders, bankruptcies can lead to hundreds of millions of dollars in losses and trigger efforts to recoup losses tied to remaining assets. In this episode of the “Weekly Wrap,” Auto Finance News Editor Amanda Harris, Senior Associate Editor Truth Headlam and Associate Editor Aidan Bush discuss the ramifications of Tricolor Auto’s bankruptcy.