Exeter Finance is going public, joining providers such as Credit Acceptance and Consumer Portfolio Services as specialists in subprime auto finance that also sell public shares.
The Texas-based company that began originations in April 2006 filed paperwork this week with the Securities and Exchange Commission for an initial public offering that Exeter hopes to generate at least $100 million.
What’s unknown is how the federal government shutdown will impact Exeter’s plans. The SEC said on its website that effective Dec. 27 and until further notice, the agency will have a limited number of staff members available to respond to emergency situations involving market integrity and investor protection, including law enforcement.
Still, Exeter’s IPO submission made it online as the complete document consists of more than 200 pages.
While Exeter shares eventually will become available once the SEC is up and running completely again, the company said that “after the completion of this offering, affiliates of The Blackstone Group will continue to own a majority of the voting power of shares eligible to vote in the election of our directors. As a result, we will be a ‘controlled company’ within the meaning of the corporate governance standards of the New York Stock Exchange."
The Blackstone Group has owned one of the more active subprime auto finance companies since the investment and advisory firm acquired Exeter for about $159 billion in assets back in 2011.
As of Sept. 30, Exeter reported in the SEC material that it had 276,000 contract holders in its portfolio as well as origination relationships with approximately 10,500 dealers across 49 states.
Again as of the close of the third quarter, Exeter shared that the company had a $4.0 billion managed portfolio of retail installment contracts with an average FICO score at origination of 567, of which 78 percent was comprised of used-vehicle financing. Through the first nine months of 2018, Exeter purchased $1.8 billion of retail installment contracts with an average FICO score of 568.
Through three quarters, Exeter also highlighted that it generated $57.4 million of net income, compared to $12.1 million for the nine months that ended Sept. 30, 2017.
“We believe our earnings growth is evidence that our extensive data and advanced analytics enhance our retail installment contract origination, servicing and risk management operating platform,” Exeter said in its SEC filing.
“Furthermore, we believe our operating platform and associated technologies are readily scalable, efficiently supporting continued growth and providing substantial operating leverage, without compromising our credit performance,” the company went on to say.
Also of note in the SEC filing, Exeter highlighted that has a $1.75 billion three-year warehouse facility with four commercial banks and has executed $8.6 billion of asset-backed term securitization issuances across 19 transactions since 2012.
“We provide indirect automobile financing to underserved consumers that do not typically have access to prime credit terms for the purchase of new and used vehicles. Our consumers are dependent upon these vehicles for transportation to work, school, and other essential daily requirements, making the demand for non-prime financing a critical component of the consumer finance market for vehicle purchases,” Exeter said.
“The non-prime automobile financing market represents a large addressable opportunity in a competitive landscape that is highly fragmented,” the company continued.
“We believe the large and fragmented nature of the non-prime automobile finance market, coupled with our growing market position and scalable operating platform, supports our ability to profitably grow our business,” Exeter went on to say.