Independent finance company AmeriCredit Corp. took a step into the prime lending world last week with the announcement that it would purchase Bay View Acceptance Corp., a prime and specialized auto loan originator.
The acquisition, expected to close in the first half of next year, will allow nonprime lender AmeriCredit to tap into a new market and will give Bay View a significantly larger corporate parent.
So far, AmeriCredit says it has no plans to change the financing strategy, which relies heavily on securitization, for either company. AmeriCredit will reportedly pay $62.5 million in an all-cash deal for Bay View, the approximate book value of the company as of the end of 2Q05.
John Hoffman, spokesman for Fort Worth, Texas-based AmeriCredit, said securitization is the preferred method of financing and he expects the company will likely continue to tap the ABS markets to help finance Bay View. However, Hoffman said it was too early to tell whether or not any future deals would come from Bay View's existing Bay View Auto Trust, or whether the assets would be sold into the AmeriCredit Automobile Receivables Trust.
In the meantime, between now and when the acquisition is completed, Bay View CFO John Okuba said the company plans to issue one more term deal, similar in size to its other recent deals, before the end of the year. Okuba said the proceeds will refinance the outstanding balance on its warehouse facility, and that the timing of the deal had been pushed up slightly due to rising interest rates.
Bay View has over $1 billion of ABS outstanding, with approximately $744 million in auto loans outstanding spread over 37,000 customers. With over $11 billion in managed auto receivables, AmeriCredit has sold roughly $6.7 billion in auto ABS this year alone.
"What attracted us to Bay View is the niche they are in," said Hoffman. Bay View purchases auto loans from dealers in 32 states, specializing in loans with extended terms and high LTVs made to prime borrowers, as those borrowers are the only kind that can qualify for those specialized loan types. The average FICO score of a Bay View borrower ranges from 730 to 740, with average loan amounts in the $30,000 area and terms as far out as 80 months. Hoffman said so far AmeriCredit has no intention of changing that focus. AmeriCredit's average customers are in the 590 to 600 FICO score range, with loan amounts averaging in the $17,000 area and 64 to 65 month terms.
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