Auto lender Consumer Portfolio Services Inc. in Irvine announced Thursday that it sold $199 million worth of loans packaged as bonds to an affiliate of Citigroup Inc.
Citigroup bought 95% of Consumer Portfolio’s bonds backed by auto loans. Consumer Portfolio held the remaining 5%. It used the proceeds of the sale to pay off a loan.
Consumer Portfolio makes loans from vehicle purchases at auto dealers then packages the loans as bonds for sale to Wall Street.
The company’s bond sale is small compared to the $1 billion in offerings it was doing in 2006 and 2007.
But that Consumer Portfolio was able to sell bonds at all is notable. The market for loan-backed auto bonds, particularly those to borrowers with weak credit, has all but dried up.
“Being able to access liquidity in this difficult market environment is a testament to the platform we have built over the last few years,” Chief Executive Charles E. Bradley, Jr said in a statement.
The sale was a private transaction with Citigroup that wasn’t registered under securities laws.
The weakened credit market and slower sales from auto dealers has hindered Consumer Portfolio as it looks to fees it receives from servicing loans to get by.
The company also tightened its credit standards for new loans and raised its prices to dealers by 5% from a year ago.
Its forecast for loan sales to Wall Street fell from $700 million and $800 million at the beginning of the year to $500 million and $600 million.
Including this recent sale, it has sold $510 million worth of its loans this year.
In July, it also took in $25 million in funding and said it had amended a $120 million loan with Citigroup Financial Products Inc., in which its $87 million in outstanding debt was paid down to $70 million with the potential to extend it’s due date a year to June, 2010.
The company’s publicly traded shares were up nearly 7% in midday New York trading, giving it a market value of $45 million.
