Tricolor Auto Acceptance is preparing to file for bankruptcy as soon as today, putting a halt to expansion discussions ahead of an unexpected round of furloughs announced late last week, sources familiar with the matter told Auto Finance News.
Auto Finance News’ efforts to reach Tricolor leadership have gone unanswered.
Reports that employees were furloughed and Tricolor retail locations were shuttered began circulating after a letter dated Sept. 5 was shared on personal LinkedIn and X accounts. The letter appeared to be from the company alerting employees of a 30-day furlough expected to end Oct. 6 amid “significant and immediate financial challenges.”
However, it’s expected that the employees will likely be laid off if Irving, Texas-based Tricolor files for bankruptcy and heads toward permanent closure, according to people familiar with the matter. Company leadership told several employees that their last day was today, sources told AFN.
Tricolor has not officially filed for bankruptcy nor confirmed the intention publicly. The Tricolor Holdings website appeared to be down as of late afternoon today but Tricolor Auto’s website was still functioning.
A surprise
The move was unexpected as Tricolor discussions largely centered around growth and expansion before the company’s challenges came to light, sources said.
In fact, Tricolor leadership has expressed optimism in recent years, with the financier active in the asset-backed securitization (ABS) market and eyeing market gaps left by other subprime lenders tightening credit amid market uncertainty.
Tricolor’s loan portfolio totaled $1.4 billion as of March 31, up 20.1% year over year, according to S&P Global. Its latest ABS deal, a $217 million subprime transaction on June 10, provided no indication of financial challenges. While 31-plus-day delinquencies were higher across the $1.4 billion portfolio — up 288 basis points YoY to 10.99% — they were lower than yearend 2024’s level of 12.23% and largely in line with levels dating back to 2019, according to S&P Global.
Kroll Bond Rating Agency rates Tricolor’s securitization transactions and is aware of the news and is monitoring the situation, a company spokesperson told AFN. S&P Global and Moody’s Ratings also provide ratings for the company.
However, sources have indicated that the financier and retailer, which largely serves Hispanic consumers with little or no credit history, could be facing challenges due to rising losses coupled with current immigration policies.
Tricolor relies on funding from warehouse lines of credit from banks, term securitizations and equity capital, according to the presale. The company had five auto loan warehouse lines of credit and facilities totaling $1.2 billion, as of the June presale.
While the warehouse line providers are not public, Tricolor established a $100 million credit facility with Fifth Third Bank in September 2022, according to a company release. Fifth Third declined AFN‘s request for comment today. As of August 2023, Tricolor also had $90 million in capital from investment management company BlackRock, Daniel Chu, Tricolor’s founder and chief executive, told AFN then.
Tricolor employed 1,231 people in the United States as of April 3, according to the presale.
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