Here Comes the Repo Man
Losses are coming for Carvana ABS noteholders. What does it mean for the Parent?
This is not a projection of what might go wrong, its a post-mortem on what already has.
Loans originated by the used-car dealer Carvana are going bad, fast. Loans that were packaged into asset-backed securitizations (ABS) and sold to investors over the past four years are realizing pronounced losses. This isn’t just a problem for residual speculators. Traded and rated notes, still valued above par today, are heading for losses.
Credit rating agencies, so far, have only affirmed their ratings while clinging to stale assumptions. Noteholders remain either blissfully unaware or unwilling to prompt a public markdown cascade.
None of this matters. Even if impairments haven’t been recognized, the underlying losses have already occurred. The market just has to catch up.
Today, I crawl into the depths of these subprime securitizations to determine which structures will break, and how deep the cracks go. Further, what does it mean for Carvana itself?