Lenders Forecast Influx of Portfolio Sales Amid Bankruptcy Filings, Sector Exits

© Can Stock Photo / vaeenma

LAS VEGAS — Two lenders have filed for bankruptcy and another one has exited the space in a matter of weeks, signaling an environment that’s ripe for portfolio purchases, lenders told Auto Finance News in March.

Summit Financial Corp. — an indirect lender with operations in Alabama, Florida, and Georgia — and buy-here-pay-here dealership Ace Motor Acceptance Corp. filed for bankruptcy, while Pelican Auto Finance sold its portfolio to Westlake Financial Services.

“I don’t see a lot of M&A activity from the perspective of buying companies, but I do think there will be a lot of portfolio sales,” said Steve Thibodeau, president of Global Lending Services. Summit Financial said it intends to continue working constructively to move forward with its obligations and expects operations to continue throughout the reorganization process, company lawyer Douglas Jeffrey said in a statement to AFN.

GLS may consider portfolio purchases, but Thibodeau noted that the transactions typically run off so quickly that they are not worth the investment. Broadly, Thibodeau pointed out that companies that automate originations typically outperform those that use manual processes.

“We’ve taken an [analytical] approach, whereas other [lenders] took a traditional judgmental approach that’s decentralized,” Thibodeau said, naming Flagship Credit Acceptance and now-shuttered lenders Pelican and Gateway One. “There are a lot of players who try to do it the old-fashioned way and have not been able to keep up with the changing technologies, and those guys are having difficulty scaling the model,” he said.

With the launch of Westlake Portfolio Management LLC alongside the Pelican purchase, Westlake plans to be active in the space. “We want people to know we’re a good servicer,” Westlake Group President Ian Anderson told AFN. “We think [Pelican] will perform above expectations, because we have a daily dashboard that goes out to all the investors so they know exactly how many calls, how many right-party contacts, how many promise-to-pays have been kept.”

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As Assistant Editor at Auto Finance News, William specializing in compliance, operations, and subprime. As a Brooklyn implant by way of Ohio, he's happy to discuss the triumphs and pitfalls of Cleveland sports as well as the latest music trends. Former bylines include Candy & Snack Today, Inverse, and The Tennessean.

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