Ugly Duckling Closes its 18th Securitization; Also Announces Need to Replace Warehouse Lender
8 December 2000
Ugly Duckling Closes its 18th Securitization; Also Announces Need to Replace Warehouse Lender
PHOENIX--Dec. 8, 2000--Ugly Duckling Corporation , the largest used car sales Company focused exclusively on the sub-prime market, today announced that it has completed its 18th securitization.The securitization was among the Company's largest, with loan principal balances being securitized totaling approximately $145 million and with Class A bonds being issued in the amount of $102.6 million. The coupon on the Class A bond is 6.76%, a 50 basis point reduction from the rate paid by the Company for its last securitization, which closed in August of this year.
As is the Company's practice, the securitization was insured by a bond insurance company and carries an investment rating of "AAA" (Aaa). The Company received a Class A bond advance rate of 71% of the pledged principal balances, generally consistent with prior transactions. The credit enhancements for this transaction were increased. The Company increased its initial deposit into a reserve account from 4% to 6%, and reserve account maximums were raised from the traditional 8% to 11%. A termination event was added to this transaction that requires the Company to replace its warehouse lender by April 1, 2001.
In this regard, the Company's primary warehouse lender under its existing $125 million facility recently informed the Company that as part of a global decision to exit the automobile finance market, it intends not to renew the existing warehouse line that terminates June 30, 2001. The Company believes that with its strong balance sheet, its five-year history of successful securitization transactions, and its proven business model, the Company will be able to replace its warehouse facility. To that end, the Company has received a non-binding proposal for alternative financing and intends to pursue other alternative financing sources.
About Ugly Duckling Corporation
Headquartered in Phoenix, Ugly Duckling Corporation is the largest operator of used car dealerships focused exclusively on the sub-prime market. The Company underwrites, finances and services sub-prime contracts generated at its 77 Ugly Duckling dealerships, located in 11 metropolitan areas in eight states.
This press release includes statements that constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often characterized by the words "believes," "estimates," "projects," "expects" or similar expressions. Forward-looking statements in this release relate, among other matters, to: the Company's ability to obtain new warehouse financing. Factors that could cause or contribute to differences from this forward-looking statements, and that could affect the Company's business generally, include, but are not limited to: any inability of the Company to finance its operations in light of a tight credit market for the sub-prime industry including its ability to replace its warehouse lender; any decline in consumer acceptance of the Company's car sales strategies or marketing campaigns; any deterioration in the used car finance industry or increased competition in the used car sales and finance industry; any inability of the Company to monitor and improve its underwriting and collection processes; any changes in estimates and assumptions in, and the ongoing adequacy of, the Company's allowance for credit losses including maintaining coverage and losses stabilize within target levels; any inability of the Company to continue to reduce operating expenses as a percentage of sales; and any new or revised accounting, tax or legal guidance that adversely affect used car sales or financing. Other factors are detailed in the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Factors," "Factors That May Affect Future Results and Financial Condition" and "Factors That May Affect Future Stock Performance" in Ugly Duckling Corporation's most recent reports on Form 10-K and Form 10-Q (including Exhibit 99 to any such Form 10-Q), and elsewhere in Ugly Duckling Corporation's Securities and Exchange Commission filings. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this press release. References to Ugly Duckling Corporation, as the largest operator of used car dealerships focused exclusively on the sub-prime market is management's belief based upon its knowledge of the industry and not on any current independent third party study.
For more information on Ugly Duckling, please dial 800/PRO-INFO and enter Company ticker symbol UGLY.