Here is the earnings report. Friday February 14 6:12 PM EDT
Aegis Consumer Funding Group, Inc. Announces New
Finance Facility, Placement of Convertible Debentures,
Establishment of Servicing Subsidiary
And Second Quarter Results
JERSEY CITY, N.J., Feb. 14 /PRNewswire/ -- The Aegis Consumer Funding Group (the
Company") announced today that it has reached agreement in principle with a group of funds and
financial institutions including its existing warehouse lender (the "Agreement"), for a multi- structured
finance facility (the "Facility"). The Facility includes a commitment for the purchase of $300 million
of subordinated Class B trust certificates which will support the issuance by the Company of $700
million of senior Class A trust certificates for a total of $1 billion. The Facility also includes a
commitment for the purchase of a $40 million seven year convertible subordinated debenture (the
Debenture"). The Agreement is subject to final documentation acceptable to the parties.
The Debenture will be purchased for $37.5 million and will be convertible into non-voting preferred
stock (the "Preferred Shares") of the company on a common share equivalent basis, equal to the
lesser of $4 per share or 150% times the average closing share price of the Company's common
stock during the 15 days immediately preceding the three month anniversary of the Debenture
closing. The Debenture will have a term of seven years and carry a coupon rate of 12 percent
(12%) per annum. Approximately $33 million of the proceeds of the Debenture will be used to
repay existing debt. The Debenture and the Preferred Shares, into which the Debenture is
convertible, are redeemable at any time by the Company for cash or by the holder for cash;
however, if the redemption is requested by the holder, the company, at its election may pay the
redemption price in the form of common stock. In the event the Debentures are redeemed for any
reason, in addition to the redemption price, warrants shall be issued to the holder which are
exercisable for that number of Preferred Shares into which the redeemed Debentures were
convertible. If Preferred Shares are redeemed at the option of the Company, the Company must
issue to the holder warrants to acquire an equivalent number of shares of common stock at an
aggregate purchase price equal to the redemption price paid by the Company. All warrants will
expire at the original stated maturity date of the Debenture.
The Company also announces that on January 2, 1997, Systems & Services Technologies, Inc.
("SST"), a wholly owned subsidiary of the Company, began its operations as the servicer for new
loans as they are acquired by the Company. After completion of a "phase-in" period, SST will be
prepared to assume the servicing of newly created or existing portfolios originated or owned by
other third parties. SST's operations will provide a constant fee based cash revenue stream for the
Company. According to the Company's chairman Angelo R. Appierto, "The expanded resources
at SST coupled with the Company's existing technology will provide the company with unique
opportunities in the marginal credit industry including the ability, as an independent contractor or
joint venture partner, to analyze, re-underwrite and value established portfolios for acquisition by
the Company or other interested investors. Mr. Appierto concluded, "The structure of the Facility
together with the cash revenues expected to be generated by servicing operations of SST, should
result in positive cash flows that will provide a firm foundation for moving the Company forward."
The Company also announced a reduction in the valuation of its retained interests on securitized
receivables which resulted in a $29.0 million charge, for the three months ended December 31,
1996, ($31.0 million for the six months ended December 31, 1996), resulting from higher defaults
experienced in the second quarter ended December 31, 1996 on loans previously securitized by
the Company and from the impact of reduced market liquidity for this type of asset in the wake of
recent industry performance and developments. Due in part to changes in the securitization market
and the negotiation of the new credit facilities, the Company did not securitize the loans it acquired
in the quarter ended December 31, 1996 and therefore did not recognize any gains on
securitizations in such period. The Company also increased its reserves for credit losses on finance
contracts it retained. The net loss was $26.9 million or ($1.55) per share for the three months
ended December 31, 1996 compared to net income of $1.8 million or $0.13 per share for the
comparable quarter in 1995. In the second quarter of fiscal 1997, total loan acquisitions rose to
14,584 with a total face value of $179.9 million versus 8,190 with a total face value of $100.6
million for the comparable quarter of fiscal 1996, an increase of 78.9%. For the quarter ended
December 31, 1996, revenues decreased to $6.5 million, (excluding a $29.0 million write down
taken on retained interests in securitized receivables) as compared to revenues of $10.9 million
(excluding a $1.5 million write down taken on retained interests in securitized receivables) for the
comparable quarter in 1995.
The Company reported a loss of $23.8 million or ($1.50) per share for the first six months of fiscal
1997 compared to net income of $3.8 million and earnings per share of $0.28 a year ago. In the
first six months of fiscal 1997, total loans acquired rose to 29,985 with a total face value of $370.8
million compared with 14,159 total loans and leases with a total face value of $173.6 million for the
comparable period of fiscal 1996, an increase of 113.6%. For the first six months ended
December 31, 1996, revenues increased to $22.2 million (excluding a $31.0 million write down
taken on retained interests in securitized receivables) as compared to revenues of $20.0 million
(excluding a $1.5 million write down taken on retained interests in securitized receivables) for the
comparable prior period. The gains from securitization for the first half of 1997 included gains from
one securitization of $9.7 million and the gains from securitizations for the first half of 1996 included
gains from two securitizations totaling $15.0 million.
The Agreement contemplates the private sale of up to $700 million of senior Class A Grantor Trust
Certificates and up to $300 million of subordinate Class B Grantor Trust Certificates. The
Certificates will be backed by the Company's auto loan receivables and will be unrated. The
Facility will be supported by a $50 million warehouse line. The Agreement provides for a firm
commitment as to the warehouse portion of the facility and the purchase of the Class B certificates
subject to placement of the Class A Certificates and certain other conditions. The Company has
already received an indication of interest from a major money center bank to purchase $290 million
of the Class A certificates. The Agreement provides for initial financing through the warehouse line
as the loans are acquired and subsequently sold into the Facility on a bi-weekly basis. This Facility
will replace one of its existing warehouse facilities and the loans currently in the existing warehouse
facility will be sold into the new Facility.
The Company is also pleased to announce the appointment of Joseph F. Battiato to its board of
directors. The board of directors was increased from five to seven members and Mr. Battiato was
appointed to fill one of the vacancies. Mr. Battiato has served as the Company's President since May 1995.
THE AEGIS CONSUMER FUNDING GROUP, INC.
Unaudited Financial Highlights
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
Total revenues ($22,532,414) $9,405,417 $(8,843,637) $18,563,571
Interest expense 4,214,327 2,459,041 7,227,800 4,583,387
Provision for
credit losses 6,043,350 369,275 6,579,525 1,123,050
Other operating
expenses 4,715,331 3,349,744 9,539,728 5,982,294
Total operating
expenses 14,973,008 6,178,060 23,347,053 11,688,731
Net (loss) income
before income
tax (benefit)
expense (37,505,422) 3,227,357 (32,190,690) 6,874,840
Income tax (benefit)
expense (10,606,120) 1,383,500 (8,427,030) 3,024,900
Net (loss)
income ($26,899,302) $1,843,857 ($23,763,660) $3,649,940
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