Linc Capital, an equipment leasing specialty finance company, reported a $13.3 million loss for the second quarter and "significant defaults of certain covenants under its loan and securitization agreements," which could potentially trigger a ratings action by Fitch on the subordinated tranches of Linc's 1999 securitization, sources said.
The senior, A-class tranche, which is insured by Ambac Assurance Corp., is not likely to be affected. The rating agency is awaiting the servicer report, which it should receive by the end of the month, a source said.
In addition to halting all equipment lease originations, Linc completed the transfer of its equipment lease servicing portfolio on July 15 to Stellar Financial Services, a third-party outsourcer of lease portfolio management, according to an insider at the company.
On Aug. 1, Linc was delisted from the Nasdaq Stock Market because of opinions by auditors that Linc was not in compliance with Marketplace Rule 4310(c)(14), requiring annual reports to contain audited financial statements.
Additionally, Linc was also violating Rule 4450 (a)(5), or failure to maintain a minimum $1 bid for 30 consecutive trading days, according to a statement by the issued by the company.
In January, Linc had told ASR it would securitize approximately $150 million to $200 million in small-ticket equipment leases, with Prudential Securities as manager (ASR 2/7/00). According to a rating agency source, the company has not made progress on that front.