CPS Announces Renewal of $200 Million Credit Facility
Consumer Portfolio Services (CPS) announced the renewal of its two-year revolving credit agreement with Citibank, N.A., effective July 11, 2024. This $200 million credit facility will be secured by automobile receivables that CPS owns or will purchase in the future. The agreement allows CPS to borrow on a revolving basis until July 15, 2026, after which it can either repay the outstanding loans in full or let them amortize over one year. CPS provides automobile financing to individuals with poor or credit histories, purchasing installment sales contracts from dealerships and securing them through the securitization market.
- Renewal of $200 million credit facility enhances CPS's liquidity.
- The credit facility allows borrowing until July 15, 2026, extending financial flexibility.
- Obligation to secure loans with automobile receivables may limit CPS's flexibility in asset management.
Insights
The renewal of a
From a retail investor perspective, the extended credit line indicates confidence from a major financial institution, Citibank, in CPS's business model and creditworthiness. The secured nature of the loans, backed by automobile receivables, adds a layer of security, reducing the risk for Citibank and providing a stable foundation for CPS's operations.
However, investors should be aware of the potential risks. The reliance on the securitization markets to fund contract purchases means that any disruptions in these markets could impact CPS's ability to finance new loans. Furthermore, the focus on individuals with lower credit scores inherently carries higher default risks, which could affect CPS's financial health in downturns.
From a market perspective, this credit renewal allows CPS to continue tapping into the subprime auto loan market, which has shown resilience but also carries inherent risks due to the credit profiles of the borrowers. The ability to borrow through July 15, 2026, provides CPS with a stable horizon to plan and execute its business strategies without immediate financial constraints.
For investors, it's essential to consider the broader economic conditions that could influence the subprime auto loan market. Economic downturns or increases in unemployment rates typically lead to higher default rates, which could adversely affect CPS. Conversely, a stable or improving economic environment could bolster CPS's performance as more individuals seek auto financing options.
Additionally, the renewal signals strong institutional support, which may enhance investor confidence. The structure of the agreement, with options for amortization, provides flexibility for CPS to manage its debt effectively, depending on market conditions and internal financial health.
LAS VEGAS, Nevada, July 11, 2024 (GLOBE NEWSWIRE) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced that on July 11, 2024, it renewed its two-year revolving credit agreement with Citibank, N.A.
Loans under the renewed credit agreement will be secured by automobile receivables that CPS now holds or will purchase from dealers in the future. CPS may borrow on a revolving basis through July 15, 2026, after which CPS will have the option to repay the outstanding loans in full or to allow them to amortize for a one-year period.
About Consumer Portfolio Services, Inc.
Consumer Portfolio Services, Inc. is an independent specialty finance company that provides indirect automobile financing to individuals with past credit problems or limited credit histories. We purchase retail installment sales contracts primarily from franchised automobile dealerships secured by late model used vehicles and, to a lesser extent, new vehicles. We fund these contract purchases on a long-term basis through the securitization markets and service the contracts over their lives.
Forward-looking statements in this news release include the Company's expectation that the revolving period will extend for two years, and that an amortization period may follow. The revolving credit agreement renewed on March 29, 2024, provides for both a revolving period and an amortization period to follow, but it is possible that the Company may suffer certain defaults or events of default that would terminate the revolving period or result in acceleration of maturity of the credit extended. In general, such defaults or events of default would result from losses that the Company might incur in the future. In turn, such losses might result from poor performance of receivables acquired or to be acquired by the Company, from increases in the rate of consumer bankruptcy filings, which could adversely affect the Company’s rights to collect payments from its portfolio; from changes in government regulations affecting consumer credit; or from adverse economic conditions, either generally or in geographic areas in which the Company's business is concentrated.
Investor Relations Contact
Danny Bharwani, EVP/ Chief Financial Officer
949-753-6811
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