AmeriCredit Strikes Deal to Become Compliant with Warehouse Convenants
FORT WORTH, Texas — AmeriCredit announced Monday that it now in compliance with all warehouse covenants.
On Monday, the company explained that it has received an amendment and extension of its master warehouse credit facility. The amendment, which was approved by all 10 active lenders in the facility, reduces the size of the facility to $1.11 billion from $2.25 billion, and extends the revolving period to March 2010 from October 2009.
AmeriCredit also amended certain covenants under the facility, including:
—Increasing the maximum rolling six-month annualized portfolio net loss ratio to 10 percent through October 2009; 12 percent through December 2009; 12.25 percent through March 2010; and 12 percent thereafter.
—Removing the 364-day aging limitation on pledged receivables.
—Lowering the minimum interest coverage requirement to 1.05X earnings before interest, taxes, depreciation and amortization, except for the September 2009, December 2009 and March 2010 quarters, which will be at 0.75X.
In conjunction with the amendment, the advance rate on the master warehouse facility will immediately decline from approximately 85 percent to approximately 80 percent and will gradually decrease to approximately 68 percent by February 2010.
The fully drawn cost of funds will increase by approximately 700 basis points.
Additionally, AmeriCredit amended the covenant related to the rolling six-month annualized portfolio net loss ratio included in its $750 million medium-term note facility, which enters an amortization period in October 2009, to levels consistent with changes in the master warehouse credit facility.
Subsequent to these amendments, the company said it is in compliance with all warehouse covenants.
Back in early February when reporting second-quarter results, AmeriCredit announced that has reduced number of credit centers and is continuing to trim originations in response to increased charge-offs, higher delinquency rates and lower recovery values at auction.
AmeriCredit cut the number of its credit centers from 25 to 13.
Overall, the company reported a net loss of $25.6 million, or $0.21 per share, for its fiscal second quarter, compared with a loss of $19.1 million, or $0.17 per share, for the same period a year earlier.
For the six-month period, AmeriCredit posted a net loss of $27.2 million, or $0.23 per share, compared with earnings of $42.7 million, or $0.35 per share.
Also back in early February, company officials had anticipated "that we may breach the 8.5 percent portfolio net loss covenant in our warehouse lines at the end of January."
"We are currently working with our lenders to restructure the warehouse lines and anticipate obtaining a temporary waiver for any non-compliance until an amendment of the lines is completed," explained Chris Choate, chief financial officer, at the time.
"We expect that an amendment will result in reduced warehouse capacity consistent with our lower origination run rate, as well as lower advance rates and higher cost of funds more reflective of current market conditions," Choate added.
Concluding the conference call in February, Dan Berce, AmeriCredit president and chief executive officer, pointed out, "Pivotal to our success in navigating 2009 will be restructuring our warehouse facilities to obtain covenant relief in light of the recessionary environment and effect of portfolio seasoning. Once our warehouse line covenants are addressed, we believe our balance sheet will be positioned to effectively weather this economic downturn.
"We will continue to execute our operating strategy which balances our short-term need to conserve capital and liquidity and our long-term goal of protecting the value of our franchise so that we are well-positioned to take advantage of the favorable competitive conditions once the economy improves and liquidity returns to the capital markets," he said.