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Non-Tech : Union Acceptance Corp. UACA
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To: Labrador who wrote (30)3/21/1999 5:18:00 PM
From: Labrador  Read Replies (1) of 39
 
I just look through the company's 10-Q. I think that there is an issue here -- I question the company's discount rate that they are using for determining the present value of the excess spread on their securitization. The discount rate is less than 10% -- this in my view is too low -- in fact I would expect at least a 12% discount rate. The low discount rate is increasing their earnings above where it should be. I do not believe that anyone that is knowledgeable in valuing excess servicing of subprime auto loans would purchase these residuals using such a low discount rate.

This is just my opinion -- we will know much more once their new accountants kick the tires on the company.

I am not going to buy stock in this company. Note that the if the value of the residuals on their balance sheet were cut, it would have a significant impact on the company's equity and could wipe it out. The value of the residuals is twice the capital of the company.
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