AmeriCredit Announces $500 Million Senior Subordinate Asset-Backed Securitization
FORT WORTH, Texas — On Monday, AmeriCredit Corp. announced the pricing of a $500 million offering of automobile receivables-backed securities under the AmeriCredit Automobile Receivables Trust platform, which primarily includes subprime auto loan contracts.
The lead managers on the transaction are Deutsche Bank Securities, JP Morgan and RBS Greenwich Capital. AmeriCredit uses net proceeds from securitization transactions to provide long-term financing of its receivables.
The securities will be issued via an owner trust, AmeriCredit Automobile Receivables Trust 2008-2, in five classes of Notes:
Average Life: 0.18 years
Interest Rate: LIBOR + 1.00 percent
Average Life: 1.05 years
Interest Rate: LIBOR + 4.00 percent
Average Life: 2.56 years
Interest Rate: LIBOR + 5.00 percent
Average Life: 2.38 years
Interest Rate: 10.75 percent
Average Life: 1.32 years
Interest Rate: 13.15 percent
The weighted average coupon on the Class A Notes is 6.80 percent. The Class B and C Notes were structured to yield 18.00 percent.
The 2008-2 transaction will have initial credit enhancement of 24.50 percent of the original receivable pool balance, building to the total required enhancement level of 34.10 percent of the then-outstanding receivable pool balance. The initial credit enhancement of 24.50 percent will consist of a 2 percent cash deposit and 22.50 percent overcollateralization.
The Note Classes are rated by Standard & Poor's and Moody's Investors Service. The ratings by Note Class are:
Copies of the prospectus relating to the offering of the Class A Notes may be obtained from the lead managers.
Also on Monday, AmeriCredit announced it has entered into an agreement with Fairholme Funds Inc., under which AmeriCredit will issue approximately 15.1 million shares of its common stock to Fairholme in exchange for AmeriCredit's 8.50 percent Senior Notes due 2015 at a price of $840 per $1,000 principal amount of the Notes, which are currently held by Fairholme and will be canceled.
The par value of the Notes to be exchanged will be determined based on the lower of 120 percent of the 10-day average closing price of AmeriCredit's common stock immediately prior to the closing of the exchange transaction, or $6.02 per share. As part of this agreement, Fairholme has also agreed to:
—Purchase approximately $123.0 million of notes rated below AAA in AmeriCredit's next asset-backed securities offering, expected in November 2008.
—Enter into a two-year standstill agreement that limits its ownership of AmeriCredit's common stock together with the ownership of AmeriCredit's common stock by certain accounts advised by Fairholme Capital Management, LLC, and by affiliates to 28.9 percent. Fairholme will be entitled to one seat on the company's board of directors.
Fairholme and other accounts managed by and affiliates of Fairholme Capital Management, LLC, beneficially own in the aggregate approximately 23.0 million shares, or 19.8 percent of the outstanding shares of AmeriCredit's common stock.
The issuance of additional shares to Fairholme requires approval of AmeriCredit's shareholders, according to the shareholder approval policy of the New York Stock Exchange. However, the Audit Committee of the Board of Directors of AmeriCredit has determined that the delay necessary in securing shareholder approval would impair the company's ability to complete a securitization transaction in a timely fashion, which, in turn would put the financial viability of the company at substantial risk.
So, the Audit Committee, pursuant to an exception provided in the Exchange's shareholder approval policy for such a situation, expressly approved the company's omission to seek the shareholder approval that would otherwise have been required under that policy. The Exchange has accepted the company's application of the exception.
AmeriCredit, in reliance on the exception, is mailing to all shareholders a letter notifying them of the company's intention to issue the shares without seeking their approval. The company intends to issue shares of the company's common stock to Fairholme no less than 10 days after the letter to shareholders is mailed.