THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, August 15, 1996 TAG: 9608150323
SECTION: BUSINESS PAGE: D3 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
DATELINE: NORFOLK LENGTH: 53 lines
TFC Enterprises Inc., which finances used-car purchases by higher-risk borrowers, said Wednesday it lost $364,000 in the second quarter, putting its credit agreements with lenders in default.
Norfolk-based TFC said its lenders have the option of foreclosing on their loans or repricing them. Although it is talking with its lenders, the defaults raise questions about the company's ability to survive, TFC said in a statement.
TFC's The Finance Co. subsidiary buys installment contracts with borrowers who have difficulty getting conventional credit from banks, credit unions and other financial institutions. To purchase loans from auto dealers, TFC relies on lines of credit from larger companies, including GE Capital Services and NationsBank Corp.
Organized in 1977, TFC also makes personal loans through its First Community Finance Inc.
In March, TFC's lenders restructured the terms of certain loans to the company and agreed not to foreclose on them. After expanding aggressively in early 1995, TFC had been hit last year with a sharp increase in loan delinquencies, which required large provisions for credit losses.
The company suffered a $12.31 million loss for the fourth quarter of 1995 and a $6.46 million loss for the full year.
TFC's loss for the latest quarter contrasted with net income of $1.95 million for the April-through-June quarter last year. The recent loss amounted to 3 cents per share, compared with net income of 17 cents per share for the 1995 second quarter.
TFC's deficit resulted from a 25 percent drop in net interest revenue and a six-fold increase in its quarterly provision for credit losses. Because of the company's higher interest expenses in the June quarter and its reduced purchases of loans, revenue skidded to $6.84 million from $9.1 million in the 1995 second quarter.
Meanwhile, TFC boosted its provision for credit losses to $1.5 million from $250,000 in the year-earlier period.
For the six months through June, TFC's net income tumbled 90 percent to $376,000 from $3.78 million for the first half of 1995. Per-share earnings dropped to 3 cents from 33 cents.
TFC also said Wednesday that its board of directors approved a restructuring of the company's senior management and the termination of employment agreements with certain key executives. This restructuring still must be approved by its lenders, TFC said.
In addition, the board extended the employment agreement of chairman Robert S. Raley, Jr. for another six years and agreed with Raley to terminate his rights in a deferred compensation agreement, TFC said. Raley, one of the company's founders, returned to the company late last year after three years of semi-retirement.
TFC's shares closed Wednesday at 1 1/2, down 3/8. by CNB