Subprime lender Exeter Finance Corp. filed for an initial public offering to gain a larger marketshare in the “fragmented” auto finance industry, the company said in a Jan. 8 regulatory filing with the U.S. Securities and Exchange Commission.
Blackstone-backed Exeter expects to raise $100 million in the IPO, the filing notes, though the timing of the offering is unclear. The stock would trade on the New York Stock Exchange under the ticker XTF.
Exeter had a $4 billion portfolio with an average Fico score of 567, as of Sept. 30, 2018, according to the S-1, and 78% of loans were originated on used cars. Exeter works with 10,500 dealers across the nation.
One analyst told Auto Finance News that for a company of Irving, Texas-based Exeter’s size, it would be better to sell than to go public. Blackstone has reached out to three potential buyers, according to Reuters.
Exeter increased net income to $57.4 million in the third quarter of 2018, compared with $12.1 million in the prior-year period. The lender had $3.5 billion in debt as of Sept. 30, 2018.
The S-1 filing highlights Exeter’s strategic partnerships, which accounted for 38% of originations for the nine months ended Sept. 30, 2018, compared with 28% through yearend 2017. Consumer credit applications turned down by captives, banks, and independent dealer groups are funneled to Exeter for underwriting. Exeter noted in the S-1 that it is looking to ink similar agreements with manufacturers:
“We seek to establish OEM partnerships that may offer select participating lenders general market incentives (a subsidy provided by the OEM to the lender which is passed through to the consumer or the sourcing dealer) or may receive direct pay subvention on select vehicle makes and models. We believe subvention generally increases retail installment contract capture rates, as other lenders are not provided the same credit subsidy.”
For funding, Exeter relies on the ABS market and warehouse facilities. Exeter has a $1.75 billion warehouse facility that matures in June 2021, and a $1.4 billion facility that matures in May 2020. Since 2012, Exeter issued 19 ABS transactions totaling $8.6 billion.Like This Post