National Auto Credit Announcement
5 February 1998
National Auto Credit Announcement
SOLON, Ohio, Feb. 5 -- National Auto Credit, Inc.
announced that it had reached an agreement in principle with its lenders to
defer certain principal payments due under its credit agreements. The
payments, which were originally due on January 21, 1998 and were extended
until February 5, 1998, have been further extended until the earlier of March
6, 1998 or when the Special Committee of the Board of Directors of the Company
ceases to function. The Special Committee was formed to investigate
information provided to the Company by its former auditors concerning
potentially improper activities that might affect the Company's financial
accounting records. The information, which allegedly came from current and
former employees of the Company, was not investigated by the Company's former
auditors. During the pendency of the investigation, the executive
responsibilities of the Company's chairman and president and chief executive
officer have been delegated to the Special Committee. The investigation, which
began last week and is expected to continue beyond March 6, 1998, is focusing
on the Company's fiscal year ended January 31, 1998, and particularly the
Company's reserve for loan losses and the reserve for insurance claims against
the discontinued operations of the Company.
The terms of the Company's agreement in principle with its lenders
include: that the interest rate to be paid on all of the Company's borrowings
($83.8 million at January 31, 1998), effective as of February 1, 1998, will be
at least the prime rate of interest; that the Company will make principal
payments, totaling approximately $1.5 million, during the period of deferral;
that the Company will pay all interest amounts accrued and owing as of January
31, 1998 to its noteholders under its 7.66% Senior Notes due April 21, 2004,
who were last paid interest in October 1997; and that all debts owed to the
Company's lenders will mature March 6, 1998. The Company will continue to
operate on internally generated funds until the Company's use of its line of
credit is restored or alternative sources of capital are secured.
The Special Committee is considering and pursuing the hiring of an interim
Chief Executive Officer, although no assurance can be given that the
appropriate candidate will be identified and hired in the short term. The
Company is also continuing efforts to retain an independent accounting firm to
audit its statements for its fiscal year ended January 31, 1998.
The statements contained in this release that are not purely historical
are forward looking statements within the meaning of the Securities and
Exchange Act of 1934. Among the factors that could cause actual results to
differ materially from the forward looking statements are the potential for
greater than anticipated non-performing contracts, the potential for lower
than anticipated recoverability of amounts advanced to the Company's member
dealers, availability of funds under the Company's financing arrangements, and
other factors as discussed in the Company's reports filed with the Securities
and Exchange Commission.
SOURCE National Auto Credit, Inc.