Oh no, not another cockroach?
PrimaLend Capital Partners, a company that specializes in providing financing to auto dealerships catering to subprime borrowers, has filed for bankruptcy after failing to make interest payments on its debt despite months of negotiations with creditors.
The company’s range of products includes financing for receivables, real estate, and automobile inventory, as stated on its website.
PrimaLend’s bankruptcy comes on the heels of the sudden collapses of Tricolor, a subprime auto lender, and First Brands, an after-market auto parts supplier. Court documents filed in the Northern District of Texas show that PrimaLend has estimated assets and liabilities below $500 million each.
In a press release, PrimaLend announced its intention to sell the business in bankruptcy court while ensuring continued funding and servicing of loans to its borrowers.
Specializing in financing for “buy here, pay here” auto dealerships that cater to low-income borrowers, PrimaLend faces challenging times ahead.
“No debt is being called due or accelerated as a result of this process,” reassured PrimaLend’s CEO, Mark Jensen, in the release.
“We deeply value our dealer-borrower relationships and look forward to continuing to serve the buy-here-pay-here industry as we move forward.”
The company has secured bankruptcy financing from its existing lenders to support its operations during Chapter 11 restructuring.
The surge in auto loan delinquencies and record-breaking repossessions signal further challenges for the industry. Building a business on lending to illegal immigrants for depreciating assets raises concerns.
As more companies face financial troubles, the possibility of contagion looms. Bank of England Governor Andrew Bailey has warned that the collapses of First Brands and Tricolor could be indicative of larger financial issues on the horizon.
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