Background information.
May 20, 1997 issue of Financial World - read an intriguing article on Auto lenders that are classed as non-prime or sub-prime. To expand, prime A lenders make new car loans to good credit risks; non-prime B lenders make newer used car loans to good credit risk; sub-prime C lenders make older used car loans to no so good credit risk; sub-prime D lenders make used car loans to poor credit risk. Anyway, a huge sub-prime C lender, Mercury Finance of TX restated earns down, followed by 1st Merchants; to top thing off Jayhawk Acceptance of TX filed bankruptcy. All this happened since Feb and the stocks of all used car lenders are getting clobbered. The baby is getting thrown out with the bath water. I looked over 7 B & C lenders, both UACA and
WFSI stood out as most seasoned, most profitable cos. UACA had the better reserve policy so I choose it as my buy candidate. Discovered is has been in business since 1986, weathering 1990-1 recession. It was spun off by Union Fedl Svgs Bk of IN in 1995. Got 10K. 64 % owned by Waterfield family of Fort Wayne. This is a turnaround similar to TW in 1994
Market of not prime auto lending (,000 omitted)
70,000,000 per Geo Evans CEO of Search Cap (lender buying Mecury assets)
100,000,000 per 8/96 ABA article
Apr 23, 1997 - UACA announces record revenues and earns for 3rd qtr
March 21, 1997-- Union Acceptance Corp ("UAC") today announced that it reached agreement with private investors on a $65 million senior unsecured debt issue. Funding will be Monday, March 24, 1997. This debt financing is the most successful for the co. to date, issued at
135 basis points over the relevant treasury. It has a 5.5 yr life & effective cpn rate of 7.8%
Feb 18, 1997 JD Powers states the not prime auto lending market is growing 7% a yr. Furthermore, dealers rank Ford Credit and WFSI as best lenders to work with. And 10% on new vehicles are financed by not prime auto lenders. Article on file Growth dependent of 1) slow inc growth by all but most affluent households 2) increase in household indebtedness 3) employment dislocations caused by layoffs and company downsizing.
Aug 96 issue of Amer Bnk'g Assn trade magazine publishes article on not prime auto and mortgage lenders. States not prime loans should be serviced on finance co model of bugging the hell out of late payers, should be in subsidiaries - not the main bank, should only go down to the B/C level on non-prime. Suggest not prime mortgages, 2nds, are
safer than not prime auto loans
Aug 7, 1995 Co. commenced its IPO |
