Although the proposed IPO for Long Beach Holdings Inc. has yet to come to fruition, the privately held concern plans to go ahead with efforts to tap the public term markets with its next securitization of non-prime auto loans, according to a company official.
With plans for its first public offering sometime within the next month or so, the company hopes to bring a $250 million offering, according to Marie Porchetti vice president and treasurer for Long Beach. As has been the case with its previous offerings, the deal will be wrapped by Financial Security Assurance and underwritten by Greenwich Capital Markets. Greenwich has led all of the previous ABS offerings for the issuer.
A unit of mortgage lender AmeriQuest Mortgage, Long Beach makes auto loans primarily through franchised auto dealers. As an ABS issuer, the company has sold 10 auto loan securitizations totaling just over $1.5 billion.
The company, formed in 1995, is often confused with Long Beach Mortgage a subprime home equity lending unit of Washington Mutual. In fact both companies formerly operated under the AmeriQuest umbrella, but Long Beach Mortgage was divested and bought by WaMu.
The company views itself as a competitor of some of the largest presences in the nonprime sector of the auto loan ABS market: with 30.8% of its originations coming from California, it goes head-to-head with both AmeriCredit Corp. and WFS Financial for business; in other geographic areas, the company competes with Onyx Acceptance and Franklin Resources unit Franklin Auto. Other geographic regions where the lender has a presence are Arizona (8.96%) and Oklahoma (6.4%).
Like many in the sector, Long Beach experienced some portfolio performance concerns in the late 1990's, however - following a management reorganization that began in Dec of 1997 - loan performance has increased substantially. According to its IPO prospectus filed with the Securities & Exchange Commission last October, delinquencies within the Long Beach portfolio were 3.3%, down from over 10% in 1997 and charge-offs were just 3.9%, down from 9.9%.
With the postponement of its IPO (Long Beach has not officially scrapped the offering but it has no plans to go public in the next six months), the benefits of being associated with a large, well-capitalized entity will continue. The IPO had been scheduled to bring in $110 million in cash and, while that is off the table for the foreseeable future, the continuation of the conduit facilities has not been disrupted, as had been anticipated following the proposed offering.
For example the company currently has two revolving warehouse facilities, a $200 million agreement with Greenwich Capital and a $30 million conduit with Bank One N.A. While the agreement with Greenwich was recently renewed, the Bank One facility is due to expire in August of this year.
By contrast, most of Long Beach's competitors, such as AmeriCredit Corp. and WFS Financial, are below-investment-grade rated entities. Franklin Auto parent Franklin Resources is a single-A-rated entity.