Home » Finance » Irving subprime auto lender Exeter Finance prepares to go public

Irving subprime auto lender Exeter Finance prepares to go public

Exeter Finance Corp., an Irving-based auto lender that specializes in subprime loans, is filing to become a publicly traded company.

Exeter, backed by private equity giant Blackstone Group, plans to list as XTF on the New York Stock Exchange, according to a regulatory filing this week with the U.S. Securities and Exchange Commission. Blackstone would remain the company’s controlling shareholder after the IPO.

The filing describes the subprime auto loan industry as fragmented, leading Exeter to believe it can gain a larger market share by going public. It cited an Experian report from September that indicated there are more than $400 billion in auto loans issued to consumers with credit scores below 660.

Exeter held 2.8 percent of the nation’s subprime auto loans at the end of September, with a customer base of 276,000. Texas borrowers represent 12 percent of its customers. The company works with 10,500 auto dealers across 49 states to finance loans for what it calls “underserved consumers” buying new and used cars.

It specializes in loans to consumers with credit scores of 660 or less, with a focus on the subprime market. Exeter defines subprime as customers with credit scores of 620 or less. The average FICO credit score in America is 695, according to financial website ValuePenguin.

“We believe having a personal vehicle is mission-critical for many of these consumers, particularly in serving as a means of transportation for employment, therefore consumers prioritize re-paying these auto loans,” the filing said.

Exeter’s portfolio includes $4 billion in loans — mostly for used cars — to buyers with FICO scores averaging 567, the filing said. That reliance on subprime buyers also is described as one of the company’s biggest risk factors.

“Because our focus is on consumers with non-prime FICO Scores, the actual rates of delinquencies, defaults, repossessions and losses on our retail installment contracts could be more dramatically affected by an economic downturn,” the filing said. “Non-prime consumers generally have lower collection rates and higher loan loss rates than prime consumers. Non-prime consumers have historically been … more likely to be affected, or more severely affected, by adverse macroeconomic conditions, particularly unemployment.”

With unemployment at decade-long lows nationally, Exter has been profitable in its two most recent years. Profits totaled $57.4 million for the first nine months of 2018, a significant jump from $12.1 million in profits for the same period in 2017, according to the filing.

Exeter said it expects to raise $100 million in the IPO, though that figure is largely considered a placeholder used to calculate filing fees. It’s not clear when the stock will begin trading. The SEC’s partial closure as a result of the ongoing government shutdown is likely to delay IPOs filed in January.

Founded in 2006, Exeter was acquired by Blackstone in 2011.

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