AmeriCredit lowers origination levels due to credit conditions, uncertainty in securitization market

By Jennifer Lanning Drey

Portland, Ore., March 14 - AmeriCredit Corp. has revised its operating plan in order to protect liquidity in light of deteriorating credit performance and uncertainty surrounding the company's ability to access the credit markets to fund receivables, Chris Choate, AmeriCredit's chief financial officer, said Friday.

"The primary objective of our revised operating plan is to preserve liquidity and maintain a strong balance sheet," Choate said during a presentation at the Lehman Brothers 2008 High Yield Bond and Syndicated Loan Conference in Orlando, Fla.

The company has a $200 million convertible bond issue maturing in November 2008, which it plans to retire using cash.

Under its revised operating plan, AmeriCredit has reduced its targeted level of originations to between $5 billion and $6 billion.

"We intend to maintain a lower level of originations until the capital markets stabilize and the economic environment improves," Choate said.

The volume reductions will affect the company's future earnings; however, AmeriCredit believes they are necessary due to its capital market-funded business model, which is subject to continued uncertainty regarding the securitization market. Choate added that the company expects to remain profitable at lower targeted origination levels.

The company plans to launch a securitization transaction later this month or in early April. However, because it is unable to access the securitization market, AmeriCredit will be forced to reduce origination levels to "whatever's necessary to maintain an appropriate liquidity cushion so that we don't get into any issues," Choate said.

He later commented, "Ultimately, if we're unable to capital-markets fund the business, we'd really have no choice but to look at zero origination level and/or look for other strategic alternatives such as someone who may want to step in and do some whole loan sales or potentially engage in some other strategic partnering with the business to keep the platform afloat."

AmeriCredit's liquidity is likely to fluctuate during calendar year 2008 but remain within the company's targeted level of between $300 million and $500 million, Choate said.

The company had unrestricted cash of $567 million at Dec. 31 and senior debt of $950 million.

AmeriCredit is a Fort Worth, Texas, automobile finance company.

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