Honor Finance’s $100M ABS Downgraded as Executives Exit

S&P Global Credit Ratings has downgraded deep subprime auto lender Honor Finance’s 2016 ABS issuance because the riskiest bonds issued are “at risk of not being repaid,” according to the report.

The latest downgrade highlights some challenges for the company including steep delinquencies and losses, as well as fast executive turnover.

The president and co-founder departed in December 2017, the chief financial officer retired in March, and  Honor’s other co-founder, who was serving as its chief operating officer, chief compliance officer, and the most recent role as president, left the company in May, according to the S&P report. Honor’s controller has become the interim CFO.

“Honor Finance LLC stopped originating loans at the end of May and is in discussions with a third party to assume various servicing functions,” the report notes.

Through June, delinquencies 30 days or more past due were 25.4% of the pool and 60-day delinquencies have been rising since March as the company pursued a “less liberal approach to extensions.”

S&P now believes net losses could rise to approximately 30% of the original $100 million receivables balance. The rating agency is also reaffirming its rating of classes A and B loans within the pool of loans.

Honor Finance follows Summit Financial Corp. and Spring Tree Lending, which have also folded or stopped originating loans this year.

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