THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, February 2, 1996 TAG: 9602020389
SECTION: BUSINESS PAGE: D3 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 59 lines
A prediction of heavy losses for the fourth quarter caused shares of TFC Enterprises Inc. to lose almost half their market value Thursday.
Burdened by a growing volume of sour auto loans, the Norfolk-based finance company said it expects to report a loss of $12 million to $13 million for the quarter ended Dec. 31.
TFC, which specializes in financing used-car purchases by borrowers with poor credit, said it expects to lose between $6.2 million to $7.2 million for all of 1995.
The company's shares, which trade in the Nasdaq National Market System, plunged from 4 5/8 on Wednesday to a 52-week low of 2 1/8 on Thursday before closing at 2 1/2.
Because of its losses and its charge-offs of bad loans, TFC said it no longer complied with its credit agreements with certain lenders.
In a public statement, TFC said it was talking with its lenders and exploring alternatives for dealing with its financial difficulties.
TFC president and chief executive officer George R. Kouri and chief financial officer Charles M. Johnston could not be reached for the details.
TFC blamed its difficulties on the deteriorating quality of auto-loan contracts that it bought and serviced at its Dallas and Jacksonville, Fla., regional offices.
``This is an industrywide problem, but it's more pronounced at TFC,'' said Andrew Jeffrey, an analyst with the Chicago-based securities firm Rodman & Renshaw. ``Their efforts to charge off their delinquent accounts are too little and too late.''
TFC said it charged off $24.4 million of loan contracts during the recent quarter. That compared with $6 million of charge-offs during the fourth quarter of 1994.
The company's heavy losses, its reduced liquidity, and the increasing competition for auto loans to risky borrowers have created a difficult environment for TFC, Jeffery said. One option for TFC is to seek an acquirer, he said.
On Thursday, Ford Motor Co. announced plans to form a new company that will tap the market for car buyers with poor credit histories.
Like several of its competitors, TFC borrows from large financial companies like GE Capital Corp. and then buys installment-loan contracts from used-car dealers.
TFC and others in its business attempt to offset the risk of borrower default by charging interest rates significantly higher than what more credit-worthy car-buyers pay.
TFC said it will report its financial results for the Dec. 31 quarter and the full year late this month.
Its expected loss of $1.06 to $1.15 a share for the fourth quarter compares with net income of 17 cents a share for the year-earlier quarter.
TFC said it expected to lose 55 cents to 64 cents a share for all of 1995, which compares with per-share earnings of 64 cents for 1994. by CNB