Pelican Ceases Originations Citing Increased Competition, Low Margins

Pelican Auto Finance LLC ceased originations and sold 95% of its portfolio earlier this month because it “entered the cycle at the wrong point,” Co-Founder and Chief Executive Troy Cavallaro told Auto Finance News.

When Pelican entered the sector in 2013, “we thought it was the third inning of the cycle, but it was probably the seventh,” he said. “We got in late in the cycle and, shortly thereafter, in 2014, the margins started to compress as competition entered the space.”

The Chadds Ford, Pa.-based deep-subprime lender transferred 70,000 loans — 95% of its portfolio — to Westlake Financial Services’ new wholly owned subsidiary Westlake Portfolio Management LLC on March 15.

Westlake launched the subsidiary in February, and it will be managed by the Westlake Financial Services team, including President Ian Anderson and Chief Financial Officer Paul Kerwin. Additional M&A activity is on the horizon, Todd Laruffa, vice president of Westlake Advance Lending & Portfolio Services and head of Westlake Portfolio Management, told AFN.

“We will still see some smaller regional finance companies exit the market, but as you see them exit, you will see some enter, as well,” he said. “This is a cycle we see every five to six years. [Westlake] will still see a few more opportunities in the market in the next year or so.”

Pelican halted originations Dec. 1, 2017, after tapering off in late summer, Cavallaro said.

Pelican had a $100 million portfolio as of July 2017, according to a previous company press release.

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