Two decades in the subprime auto finance space and 275% stock growth in the past year have put Consumer Portfolio Services on the LA Times’ “Stock Spotlight” list.
The article paints a picture of a finance company that opened in Orange County, Calif., an area bustling with subprime players, at a time when the industry was thriving. It goes on to explain how CPS, with CEO Charles Bradley Jr. at its helm, survived two economic downturns.
But in the late 1990s, many of those lenders, struggling under too much debt, went under. CPS survived.
Then the mortgage meltdown and the financial collapse of 2007 and 2008 again hit subprime auto hard. CPS, for example, lost a line of credit overnight.
With the market frozen, CPS couldn’t sell any auto-loan-backed securities for about 18 months, forcing it to borrow heavily. Loan originations ground to a halt, and the company laid off 60% of its staff. From 2009 through 2011, CPS lost $105 million.
Despite the difficulties, CPS pulled through. In the past two years, its portfolio has grown 70% to nearly $1 billion. And the company continues to securitize loans regularly. It’s on pace to issue $750 million of securitizations this year, up from $550 million in ABS last year.
The company’s stock [ticker: CPSS], too, is on the rebound. It climbed to $12.40 a share in March after plunging to $0.25 a share in February 2009. And CPS recently renewed a $100 million line of credit with Citibank and has another warehouse facility with Goldman Sachs.
Still, some challenges remain. Here’s how the article outlines the hurdles:
With so much profit in subprime auto, rivals to CPS are emerging, including larger lenders and banks. CPS also is seeing higher delinquency and default rates, which worries some investors.
But with two decades of experience under his belt, Bradley has more experience than many managing a subprime auto finance company.
