Please see the following article by the Dow Jones News Service. JACC, due to its rapidly
deteriorating business, may be unable to find a lender and if JACC will not succeed
in its effort to find one by Monday, that failure will be taken by the Wall Street that
JACC is heading towards Chapter 13. Considering the current market cap of JACC is much
higher than the current shareholders equity in it, the stock will adjust and I see
it collapsing to below $1.
Woes Continue to Mount
For Used-Car Lending Firms
By JEFF BAILEY and CARLOS TEJADA
Staff Reporters of THE WALL STREET JOURNAL
The debacle in the used-car lending business worsened as Jayhawk Acceptance Corp. said it would be
forced to seek bankruptcy-law protection and Mercury Finance Co.'s unpaid debts continued to pile
up.
In addition, Moody's Investors Service Inc. lowered some debt ratings on Olympic Financial Ltd.,
citing the "challenges" that the Minneapolis auto-finance company faces in managing the "aggressive
growth."
In little more than a week, what had been a fast-growing sector of the consumer-finance industry has
turned into a wreck for investors and some institutional lenders. The combination of fragile balance
sheets, concentration of often risky loans and some instances of aggressive -- or irregular --
accounting makes the business extremely reliant on fickle sources of funds.
Funding Danger
These lenders, unlike banks, don't fund themselves with more stable deposits, but in the capital
markets, where funds can be quickly cut off.
"There's no doubt that events that have taken place in the past week and a half will make it more
expensive for everybody in the industry to finance their business," a spokeswoman for Olympic
Financial said Thursday.
Jayhawk, based in Dallas, last week disclosed that it had violated its borrowing covenants after it was
forced to make a big addition to its reserves for loan losses, halt business with some car dealers and
scale back its growth plans.
Jayhawk said the bank holding its revolving credit agreement, Fleet Financial Group, told the
company that it would deliver a notice of default and acceleration on the loan.
Jayhawk said that about $40 million is owed on the Fleet loan agreement.
James Mahoney, a Fleet spokesman, said the bank couldn't meet Jayhawk's requests for more
borrowings because Jayhawk already had drawn all the money available under the loan agreement.
Mr. Mahoney said Fleet doubted Jayhawk would establish financing with another lender because of
the sudden volatility of the credit market for auto lenders.
"Fleet has made strenuous efforts and taken the initiative to find a solution outside bankruptcy
proceedings. We regret this has not been possible," Mr. Mahoney said.
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