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Automobile financier Union Acceptance Corp. has filed for Chapter 11 bankruptcy protection as it attempts to restructure its debt obligations in the face of mounting losses, according to LendingIntelligence.com.
The Indianapolis-based auto lender posted a third-quarter net loss of $35.5 million, or $1.14 per share, compared with a loss of $23.8 million, or $0.77 cents per share, during the same period last year.
A number of problems — from rising delinquency and loss rates to a limited availability of funding — drove the company to take the measure, Lee Ervin, president and chief executive of Union Acceptance, said on a Nov. 1 conference call, according to LendingIntelligence.com.
The company has a plan to pay its employees and key vendors, according to Ervin.
The company has suspended receivable acquisitions, and Ervin said he expects debtor-in-possession financing to be secured within the next several days, which will enable the company to resume buying loans from the dealers it associates with, according to LendingIntelligence.com.
In the third quarter, the company continued to experience increases in delinquency and credit losses, attributing it to the continued effects of the ongoing recession, a record level of bankruptcy filings and lower automobile auction values.
Union Acceptance’s delinquency rate was 4.22 percent as of Sept. 30, compared with 3.79 percent in the prior quarter and 3.73 percent a year ago. Total dollars delinquent for the quarter were $110 million, up from $102.8 million in the second quarter, but down from $116.6 million in the third quarter of 2001.
In its earnings release, UAC stated it typically experiences higher delinquencies in the fourth quarter as a result of normal seasonal trends.
Annualized net credit losses totaled 4.50 percent for the third quarter, compared with 3.67 percent in the same period a year ago. The company’s allowance for estimated credit losses on securitized receivables was 6.66 percent as of Sept. 30, 2002 compared with 5.87 percent in the same period a year ago.
Nasdaq halted trading on Union Acceptance Oct. 30, and Ervin said he that while he was in negotiations with officials at the exchange, he could not definitively assure investors the company would not be delisted, according to LendingIntelligence.com.
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