Performance Trust Capital Partners, LLC to Provide Lending Capital to Universal Special Auto Finance Sub-prime Program
CHICAGO--Universal Special Auto Finance, Greenwood Village, Colo., has chosen Performance Trust Capital Partners, LLC, to provide the lending capital for Universal’s new sub-prime automotive lending program through the Performance Trust nationwide network of client banks.
Universal is a full-service, turnkey, sub-prime auto finance company whose management has many years of sub-prime lending experience. This program will provide a new, more stable way for financial institutions and other investors to participate in the sub-prime auto loan market.
Universal has partnered with nationally known and respected businesses to offer its new lending program. While dealer contacts and deal underwriting will be handled by Universal, Computer Science Corporation, a Fortune 150 company with significant experience servicing sub-prime auto loans, is the designated primary servicer. In addition, Great American Insurance Company will offer optional insurance on these loans as a way to mitigate the default risk.
“We have spent considerable time and effort studying the macros of the sub-prime market and modeling the risk-reward profile of these types of auto loans,” said Performance Trust CEO Richard Berg. “Contrary to our original expectation, we have found it to be a very attractive lending opportunity for our clients, and forged ahead with an agreement with Universal.”
This new program, Special Auto Finance (SAF) Series1 is unique and innovative, designed specifically to provide a high-yield, managed risk opportunity for financial institutions.
John Frew, Universal’s president added, “We are pleased that Performance Trust has joined our team. In addition to securing lending capital, Performance Trust will provide necessary perspective and guidance to financial institutions that are active in the SAF Series1.”
Commenting on SAF Series1, Berg noted, “One of the unique features is the opportunity to purchase insurance for these loans. We have an A-rated insurance company willing to put their balance sheet on the line to insure this product.”
He continued, “This sector is one that can provide far superior risk-adjusted returns versus more traditional lending. The decision to enter into a sub-prime market requires a significant amount of education for financial institutions to understand the analytics and statistics behind such a sector. However, the institutions that have done their due diligence tend to agree with our conclusions regarding this promising sector.”
The current interest rate environment is very difficult for financial institutions, as the inverted yield curve, deposit competition and shrinking risk premiums on traditional lending products have resulted in declining net interest margins. Even traditionally conservative lenders are investigating new product lines in an effort to reverse the declining margin trend and to grow their business.
“Banks cannot afford to ignore this opportunity. We believe that they should at least listen and investigate,” said Berg. “Twenty-five years ago, junk bonds were not considered an acceptable asset class. Now every prudent investor would consider allocating some portfolio percentage to the high-yield sector. We believe that over time, many banks will view the sub-prime or special auto finance sector in the same way.”
About Performance Trust
Performance Trust, based in Chicago, is a NASD member broker-dealer specializing in fixed-income securities and merchant banking. Its affiliate, Performance Trust Investment Advisors, LLC provides investment advice and conducts its nationally known Bond Math University programs for financial institutions throughout the United States.