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AmeriCredit Posts 4Q Profit; Looks to Sign Up Dealers

Not only did AmeriCredit post a fiscal fourth-quarter profit, but the auto finance company said it plans to sign up new dealers after successfully executing its first subprime auto securitization in 2009.

by Staff
August 6, 2009
3 min to read


FORT WORTH, Texas — Not only did AmeriCredit post a fiscal fourth-quarter profit, but the auto finance company said it plans to sign up new dealers after successfully executing its first subprime auto securitization in 2009.

In a conference call with investors yesterday, officials said the company earned $31.3 million for the quarter ended June 30, compared with a loss of $150.2 million a year earlier. The prior year’s results included a $135 million charge in connection with the acquisitions of Long Beach Acceptance Corp. and Bay View Acceptance Corporation.

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Originations were $175 million for the quarter, compared to $780 million for the same quarter last fiscal year. Originations for the fiscal year dropped from $6.29 million last year to $1.29 million this year.

Additionally, loans during the quarter carried an average annual percentage rate of 17.8 percent, compared to 17.3 percent for the March 2009 quarter, and 15.7 percent for the June quarter last year.

“As you have seen from our earnings release earlier today, we closed out an extremely challenging fiscal year on solid footing,” said Dan Berce, president and CEO of AmeriCredit. “Subsequent to year end, we successfully executed the first subprime auto securitization in 2009. Our $725 million 2009-1 transaction garnered significant interest from investors and every note series was oversubscribed, allowing us to increase the size of our offering and tighten the pricing of the transaction.”

On the heels of its successful July securitization and resulting paydown of its Master Warehouse facility, Berce said the company is raising its originations targets going forward. The goal, he said, is to gradually increase originations to at least $300 million per quarter by December 2009, with continued incremental increases through the end of calendar year 2010.

“We plan to reactivate or sign up dealer relationships and add marketing representatives to generate higher application flow,” Berce said. “We also plan to modify credit standards where appropriate, including marginally lowering credit score cutoffs in geographic regions that have demonstrated consistent or improving credit performance in recent months.

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“We have not and do not plan to ease key underwriting standards, such as loan-to-value ratios and verification requirements.”

While its tighter standards resulted in only modest credit losses, delinquencies did increase. For the June quarter, annualized net credit losses were 7.1 percent, compared to 7.8 percent for the March quarter and 5.9 percent for the June 2008 quarter.

Additionally, 31- to 60-day delinquencies rose from 6 percent during the same period last year to 6.9 percent during the June 2009 quarter. Accounts greater than 60 days delinquent were 3.5 percent at the end of the quarter compared to 4 percent during the March quarter, and 2.9 percent for the quarter ending in June 2008.

However, officials do expect net credit loss to peak in the December 2009 quarter, but said a majority of its 2006 and 2007 vintage originations, which were most impacted by the economic downturn and make up 60 percent of the company’s current portfolio, should be past their peak loss period.

“We anticipate that will we sill see better credit performance overall as our more recent originations become a greater part of the overall portfolio,” noted Berce, who said lifetime losses on the company’s 2008 and 2009 vintage originations are trending significantly better than cumulative losses in its 2006 and 2007 loans.

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“We are pleased to have been able to report positive returns despite the unprecedented economic and capital market conditions that we faced over the past year,” said Berce. “Our balance sheet is strong, with over $483 million of liquidity and significant cash generation potential from our $11 billion portfolio. Our funding platform is stable with sufficient warehouse capacity to support an increasing level of originations, low and declining leverage and no unsecured debt maturities until September 2011.”

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