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National Auto Finance Announces Certain Amendments

1 March 2000

National Auto Finance Company, Inc. Announces Certain Amendments, Waivers and Terminations to Agreements With First Union

    JACKSONVILLE, Fla.--March 1, 2000--National Auto Finance Company, Inc. (OTC:NAFI) announced today that on February 22, 2000, National Financial Auto Funding Trust ("Funding Trust"), a wholly-owned finance subsidiary of NAFI, defaulted in its obligation to deposit approximately $5 million in collateral to secure its obligations under an $85 million auto loan warehouse financing facility with First Union National Bank. The First Union financing facility was the Company's primary source of funding for its acquisition of motor vehicle retail installment sale contracts. The Company does not currently propose to replace the warehouse financing facility, electing instead to continue to focus on its strategy of underwriting the acquisition by third-party auto finance companies of retail installment sales contracts from the Company's network of auto dealers and servicing the contracts acquired by such third-party finance companies.
    First Union agreed to waive until April 21, 2000, certain rights arising out of the warehouse facility default to liquidate the portfolio of approximately $58.9 million of installment sale contracts that secure its loans to Funding Trust, thereby permitting the Company to pursue various strategic options. First Union further agreed to waive until April 21, 2000, the right to terminate the Company as servicer of the loans held by Funding Trust. In addition, First Union agreed to defer until March 21, 2000, the obligation of Funding Trust to remit approximately $850,000 in net interest collections in respect of such portfolio. Commencing March 21, 2000, net interest collections in respect of the portfolio securing the First Union loans that were previously distributable to Funding Trust will instead be applied to repay the outstanding loans under the First Union warehouse facility. The net interest collections in respect of the portfolio have totaled approximately $725,000 per month in recent months.
    NAFI is also the servicer of approximately $121 million of loans previously originated by the Company that secure five separate asset-backed bond issuances. No defaults exist under any of such bonds.
    In related developments, First Union terminated its commitment to purchase up to $20 million of subordinated asset-backed debt securities in connection with the Company's future securitizations, if any, and converted to a 48-month term loan $3 million under the revolving working capital facility secured by the Company's residual interests in securitizations.
    On February 4, 2000, the Company and NuVell Credit Corporation ("NuVell") entered into agreements whereby the Company, in return for origination fees, agreed to originate motor vehicle retail installment sales contracts exclusively for the benefit of NuVell through NAFI's existing dealer relationships and immediately assign such contracts to NuVell. The Company will retain servicing of all such contracts assigned to NuVell in return for servicing fees. The NuVell agreements expire on May 31, 2000, subject to renewal upon mutual consent of both parties.
    Although extension of the NuVell agreements is subject to mutual consent by the Company and NuVell, management believes that the Company's best strategy for future growth is linked to originating contracts for other consumer finance companies on a service retained basis in return for both origination and servicing compensation rather than dedicating capital resources to originate contracts for its own account and/or in anticipation of engaging in periodic asset-backed securitization transactions.
    National Auto Finance Company, Inc. is a specialized consumer finance company engaged in the origination and servicing of automobile loans primarily originated by manufacturer-franchised automobile dealers for non-prime consumers. The company markets its products and services to dealers through the efforts of its direct sales force and through strategic referral and marketing alliances with financial and other institutions that have established relationships with dealers. NAFI has active contractual relationships with approximately 1,000 dealers in 35 states.
    This news release contains statements that are forward-looking statements within the meaning of applicable federal securities laws and are based upon the Company's current expectations and assumptions, which are subject to a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. Primary factors that could cause actual results to differ include regional and national economic conditions, substantial changes in levels of market interest rates, credit and other risks of lending and investment activities, and competitive and regulatory factors. Certain of these as well as other factors are described in more detail in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, and in certain other reports filed by the Company with the Securities and Exchange Commission.