Right. How it is called now? "Endless Justice?" I'm already wondering whether this one can turn into yet another First Plus... hmph.
Americredit ACF, their business cries for more trouble ahead:
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AMERICREDIT: Fitch Affirms BB+ Rating Seeing Weak Capitalization
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Fitch affirms the 'BB+' senior debt rating of AmeriCredit Corp.
(ACF), and revises the Rating Outlook to Negative from Stable.
This change reflects Fitch's concern of declining capitalization
in relation to the current economic environment and the risk
profile of ACF's balance sheet.
In Fitch's assessment, ACF's capitalization profile has declined
ever since the company issued a secondary stock offering in
August 1999. As of Sept. 30, 2001, equity to managed assets has
dropped to 8.77% from 10.04% at Sept. 30, 1999.
The primary driver behind the decline in capital ratios has been
the company's robust receivable growth. The composition of ACF's
capital structure remains weak.
Securitization-based residual assets totaled $1.25 billion or
110% of total equity (equity does not include a deferred tax
liability of approximately $140 million) at Sept. 30, 2001. The
value of these securitization-based residual assets is based on
assumptions related to asset quality and prepayment speeds.
Fitch assesses a significant risk-weight to these assets in its
internal capitalization model. With the substantial decline in
ACF stock price, the injection of common equity into the capital
structure is less likely. If current capitalization trends
continue, the ratings may come under negative pressure.
As a subprime automobile lender, ACF maintains a high-risk loan
portfolio. To date, asset quality has performed within initial
expectations, but Fitch expects losses to accelerate in a
weakening economic environment. The company remains heavily
reliant on secured financing and securitization for funding, and
it depends on cash flow from previously executed securitizations
to fund its day-to-day operations.
Based in Fort Worth, TX, ACF has become the largest independent
subprime automobile finance company in North America. As of
September 30, 2001, ACF maintained $11.3 billion in managed
automobile finance receivables. |
