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AmeriCredit Corp. has loosened its credit standards and increased originations, but further expansion depends on securitization market.
CEO Dan Berce told analysts in the company's latest earning call that AmeriCredit needs a market for BBB rated bonds before originations can reach $1 billion a year.
The demand exists for higher volumes, Berce said, and there is some interest in the market for BBB bonds. It is limited, though.
One challenge is credit agencies continue using conservative ratings for subprime contracts.
AmeriCredit has found success in recent securitizations and plans on executing another before the scheduled end of the government's term asset-backed securities loan facility (TALF).
The company's last securitization in October had no TALF investors, but Berce said this round will include lower-rated paper because of TALF.
Berce expect less favorable pricing than the October securitization, but better than a July issue.
The improved market allows AmeriCredit to offer more competitive rates.
"We really had rates designed design not to book many loans because we really didn't have the capacity," Berce said.
The company now offers lower credit score cut-offs in some regions, as well.
"We're not afraid of going deeper into credit if we can get the pricing for it."
AmeriCredit reported a profit of $46 million for the quarter ended Dec. 31. The company reported a net loss of $35 million for the same period a year earlier.
Originations were $379 million for the quarter, compared to $321 million for the same quarter last year.
Annualized net charge-offs were 8.9 percent of average finance receivables for the quarter, compared to 9.5 percent for the same period a year ago.
Finance receivables 31-to-60 days delinquent were 7.7 percent of the portfolio at Dec. 31, 2009, compared to 7.8 percent at Dec. 31, 2008. Accounts more than 60 days delinquent were 3.7 percent of the portfolio, compared to 4.2 percent a year ago.The allowance for loan losses as a percentage of finance receivables was 7.7 percent at Dec. 31, 2009, compared to 8.2 percent at Sept. 30, 2009 and 7.1 percent at Dec. 31, 2008.
The company had total available liquidity of $750 million at 2009, consisting of $320 million of unrestricted cash and approximately $430 million of borrowing capacity on unpledged eligible receivables.
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