Fitch Ratings Lowers AmeriCredit's Rating

    CHICAGO--March 28, 2002--Fitch Ratings lowers the senior unsecured rating of AmeriCredit (ACF) to 'BB' from 'BB+ '. The Rating Outlook has been revised to Stable from Negative. The rating action centers on concern regarding excessive growth well above internal capital formation, dependance on the secured markets for long-term financing, and volatility inherent in the company's short-term warehouse facilities due to the presence of rating triggers. The rating continues to reflect ACF's good performance to date, sophisticated risk management capabilities and a leading market position in subprime automobile finance.
    ACF's capitalization profile has continually declined following the company's secondary stock offering in August 1999. As of Dec. 31, 2001, equity to managed assets has dropped to 8.99% from 10.50% at Sept. 30, 1999. The primary driver behind the decline in capital ratios has been the company's robust receivable growth. ACF's managed auto receivables totaled $12.4 billion at Dec. 31, 2001, an increase of 51% since Dec. 31, 2000. The composition of ACF's capital structure remains weak. Securitization-based residual assets totaled $1.5 billion or 120% of total equity (equity does not include a deferred tax liability of approximately $140 million) at Dec. 31, 2001. The value of these securitization-based residual assets is based on assumptions related to asset quality and prepayment speeds. Fitch assesses a significant risk-weight to these assets in its capitalization assessment. ACF has not supplemented its portfolio growth with additional common equity, further eroding its capital structure.
    The company remains heavily reliant on secured financing and securitization for funding growth over the intermediate term. Continued access to the securitization market remains vital to pay down warehouse lines. Fitch is concerned about the ultimate availability of warehouse funding that can occur in the event of a three-notch rating downgrade.
    ACF's cash flow from previously executed securitizations provides liquidity to fund its day-to-day operations. Cash distributions from the securitization trust's for the six months ended Dec. 31, 2001, were $128 million. A concern however, is that there is clearly some volatility around actual cash flow from the trusts. This could occur if there was a shortfall in asset quality in one or more of the specific trusts. The securitization trusts are all cross collateralized, such that if a specific trust experiences extremely high credit losses, and negative cash flow, then the cash is captured from the balance of the trusts until that is effectively cured. ACF could limit volatility of cashflow distributions by instituting a higher percentage of uninsured and non-cross collateralized structures into its securitization mix.
    As a subprime automobile lender, ACF maintains a high-risk loan portfolio. To date, asset quality has performed within initial expectations, but Fitch expects losses to accelerate in a weakening economic environment. The company continues to monitor credit score hurdles and performance. The company raised minimum acceptable credit scores across the branch network in 1999, and raised selected market scores in 2000 and 2001. In addition, ACF uses deferments to manage a subprime consumer through a troubled environment for the consumer. This practice has helped reduce loss and delinquency ratios.
    ACF's earnings quality is less predictable than many consumer finance companies as revenue is derived principally from securitization gains and servicing income. Non-cash gain on sale, as required by SFAS NO. 140, as a percentage of total revenue continues to be a major contributor of total revenue. Reduced execution in the securitization markets would directly impact reported revenue and income. Gain on sale as a percentage of revenue has hovered around 38% for the past three years.
    Based in Fort Worth, TX, ACF has become the largest independent subprime automobile finance company in North America. As of Dec. 31, 2001, ACF maintained $12.4 billion in managed automobile finance receivables.