AutoBond Updating Investors to Various Funding and Credit Performance
10 February 1999
AutoBond Updating Investors to Various Funding and Credit Performance
AUSTIN, Texas, Feb. 9 -- AutoBond Acceptance Corporation
(Amex: ABD) ("AutoBond"), listed on the Amex under the symbol ABD, is updating
investors as to various funding and credit performance information.
The Company's primary source of financial liquidity is Dynex Capital, Inc.
("Dynex"). As previously disclosed, AutoBond has been responsive
to Dynex in the past and has accommodated their repeated requests to amend the
original financing agreements to foster Dynex's liquidity. The terms were
modified on June 30, October 20, and October 28, 1998. Under the most recent
terms, the advance rate was reduced from 104% to 88% for an interim period,
ending no later than December 31, 1998. By December 31, 1998 Dynex was
required to advance the additional (adjusted for amortization) 16%. Further,
AutoBond has the option to extend the financing agreements with Dynex through
November 30, 1999. In fact, throughout January, 1999 Dynex did not complete
their funding to AutoBond of the additional 16%, although such amount was
forthcoming in the past week. With respect to new financing requests, since
the fourth quarter 1998 a number of these have been funded slower than the
prescribed timeframe (2 days) in the financing agreements. The last filled
financing request was
January 29, 1999. Notwithstanding the lack of timeliness of fundings,
AutoBond is pleased that Dynex has to date advanced almost $170 million.
At AutoBond's expense, using criteria requested by Dynex, procedures
letters are prepared by accountants on a monthly basis with respect to both
underwriting and servicing of the Dynex assets. These reviews have
demonstrated material compliance with AutoBond guidelines. Dynex recently
completed underwriting due diligence with the assistance of third-party
consultants. Dynex has asserted that the initial results suggested
significant non-compliance with AutoBond guidelines. However, AutoBond has
provided detailed loan-by-loan responses to the Dynex due diligence report and
was able to ascertain that the loans were not properly reviewed against the
AutoBond guidelines. In the interim, Dynex has not been funding. AutoBond is
concerned with the pattern of liquidity accommodations to Dynex, followed by
non-compliant, untimely funding, and now most recently funding restraint on
faulty findings. Although success is not assured, AutoBond is working
intensively to ensure that funding is back on track with Dynex as soon as
possible.
AutoBond's credit performance and measures, particularly with respect to
the Dynex funded assets, continues to improve and exceed expectations.
Overall delinquency rates of the AutoBond servicing portfolio have declined
significantly in the past year. The 60-89 day delinquencies have declined from
5.85% at 12/31/97 to 3.71% at 12/31/98 and the 90+ day delinquencies have
declined from 4.47% at 12/31/97 to 3.23% at 12/31/98. In the past 6 months,
covering the period of Dynex fundings, the weighted average number of days of
delinquency declined from 13.4 days to 6.7 days at the end of January, 1999.
The AutoBond All program, introduced in September, 1998, has proven very
effective at improving the volume of applications, commensurately increasing
the follow-up purchases, and enhancing the overall credit characteristics of
the acquired finance contracts. Various comparative measures from 1997 versus
November and December, 1998 acquisitions include: average obligor income
increased from an average of $2,192 to $2,674; average time on the job
increased more than a year from 3.6 years to 4.8 years; and the average
vehicle age declined from 2.7 years to 2.1 years. The average purchase
discount for the fourth quarter was 7.6% versus 8.5% prior to the ALL program.
AutoBond currently has 6,531,311 common shares and 1,125,000 preferred
shares outstanding. AutoBond is a specialty consumer finance company engaged
in underwriting, acquiring, servicing and securitizing retail installment
contracts originated primarily by franchised automobile dealers in connection
with the sale of used and, to a lesser extent, new vehicles to selected
consumers with limited access to traditional sources of credit. AutoBond is
located in Austin, Texas and acquires contracts nationwide from dealers in
approximately 40 states.
The above statements include information that should be considered
forward-looking within the meaning of the Private Securities Litigation Reform
Act of 1995, and in addition involve a number of risks and uncertainties.