NORTH RICHLAND HILLS, Texas -- After nearly two decades of serving the automotive dealer community, Triad Financial Corporation is moving out of the indirect dealer channel. The move, which went into effect May 23, was tied to recent market conditions and the subprime lender’s ability to attain funding, according to a company release.
Triad will continue to originate loans through its RoadLoans direct-lending division. The company's portfolio management operation, which includes customer care services, loan servicing, loss recovery and remarketing functions, will continue to operate from Triad's corporate headquarters in North Richland Hills, Texas. In addition, Triad will continue to employ support staff in Texas and at its Huntington Beach, Calif. facility.
"Conditions in the financial markets have been extraordinarily unstable, and have hindered our ability to adequately and cost-effectively fund future business through traditional methods, including asset-backed securitizations (ABS)," the company said in its release. "Triad has served the dealer community for more than 18 years, and values the relationships we have enjoyed with these dealers and the customers we share. We will no longer accept new applications as of 5 p.m., May 23. Triad will, however, honor existing approvals and fund eligible contracts forwarded to us through June 23."
In its May 20 filing with the Securities and Exchange Commission, the company said it decreased the amount of originations it purchased and originated in the first three months of the year by $54.4 million. The company attributed the decrease to further tightening of its underwriting criteria and increased pricing, which was done in response to the difficulties it had in attaining funding for nonprime loans in the ABS market. The company also cut the number of dealers it bought contracts from during the period, and stopped accepting online applications from some direct lending sources.
A day before Triad's move became effective, Standard & Poor's Ratings Service changed its outlook on the company's 'B' long-term counterparty credit rating from stable to negative. The S&P's Jeffrey Zaun said the outlook change reflected the company's weak earnings and difficulty in obtaining stable, long-term funding for new automobile receivables.
"The recent amendment to the company's warehouse lending agreement with Citigroup Inc. will eliminate Triad’s ability to fund new originations from that facility after June 30, 2008," Zaun said in his report. "The company has not attempted to borrow under its remaining $500 million warehouse facility with Barclays Bank. If that long-term financing is unavailable, or if its terms and pricing undercut the interest margin Triad can earn on loans, the company could stop originating new loans after June 30, 2008."