AmeriCredit Corp. said it expects to reduce its loan portfolio by nearly one-third this year, as executives said the company will continue to focus on maximizing cash collections from its loan portfolio and managing the business to preserve capital and liquidity.
Discussing its credit outlook and fiscal second-quarter earning in a conference call last Thursday, Dan Berce, the company's CEO, said the auto finance company reduced its credit centers from 25 to 13 last month in response to the tough economic environment.
Berce also warned that the company may breach a portfolio net-loss covenant in its warehouse lines by the end of January, but said the company is working to secure a temporary waiver to amend its credit line. As of press time today, the company had not said whether it was successful in obtaining the waiver.
"While results are not final, we anticipate that we may breach this covenant this month, and are working with our warehouse line providers to obtain waivers and amend the warehouse facilities," said Berce.
The Fort Worth-based AmeriCredit said its second-quarter loss widened to $25.6 million for the three months ended Dec. 31, from a lost of $19.1 million a year earlier.
Revenue for the finance company fell 13 percent to $566.1 million in the latest quarter, down from $653.3 million in the year-ago quarter. Annualized net charge-offs rose to 9.5 percent of average finance receivables, up from 6.9 percent.
"Over the past year, the recessionary environment has accelerated, including increasing job losses, falling consumer confidence, a decline in demand for new and used vehicles, and the scarcity and high cost of funding and capital," said Berce. "We do not expect improvement in the macroeconomic outlook in 2009. As such, we are focused on maximizing cash collections from our loan portfolio and diligently managing the business to preserve capital and liquidity."
Berce said the company purchased $321 million of loans during the December quarter, down from $579 million in the September quarter. He added that early delinquency results for the 2008 vintage originations were promising, as he said the company continued to increase both APR and net fees it charges.
Berce said he anticipates the company will maintain an originations’ run rate of up to $100 million a month through calendar 2009, as the company expects to decrease its loan portfolio from its current $13 billion to approximately $9 billion. He added that the company will continue to monitor the Term Asset-Backed Securities Loan Facility (TALF) program, but said he doesn't anticipate the company having to access the securitization market until late 2009.
"Pivotal to our success in navigating 2009 will be restructuring our warehouse facilities to obtain covenant relief in light of the recessionary environment and effect of portfolio seasoning," Berce said. "Once our warehouse line covenants are addressed, we believe our balance sheet will be positioned to effectively weather this economic downturn."
