MINNEAPOLIS, Sept. 14 /PRNewswire/ -- Arcadia Financial Ltd. (NYSE: AAC)
announced today the pricing of $600 million of automobile receivables-backed
securities through J.P. Morgan & Co., BancAmerica Securities, Inc., Chase
Securities Inc. and Credit Suisse First Boston. Arcadia has now issued $1.675
billion of asset backed bonds to investors during 1998, making it one of the
most consistent issuers in the market.
The coupon cost to the investor was approximately 5.63% compared to the
APR of loans in the initial delivery of approximately 16.73%, giving Arcadia a
gross interest spread before hedges of approximately 11.10%, slightly lower
than the previous quarter.
Richard A. Greenawalt, Arcadia's President and Chief Executive Officer
commented, "We are very pleased to have completed this transaction at
favorable yields in such a tough treasury market environment. All asset types
experienced the same type of widening spreads over treasuries that we
experienced this quarter. However, the asset backed market is still the most
efficient source of funding available to many companies and we expect to
continue to use this market as one of our primary sources of liquidity. While
the widening spreads over treasuries will have an impact on earnings for the
quarter, our expense ratios and static pool loss performance continue to show
improvement. The September 1998 quarter will show solid earnings and we
expect this trend to continue going forward."
Greenawalt also noted that Arcadia's average APR has been decreasing
slightly, reflecting its renewed emphasis on selecting more profitable loans
to purchase. "Arcadia has been diligently implementing our new risk based
pricing model over the past several quarters. This new model more accurately
prices the loans we purchase and increases the accuracy of our gain on sale
estimates," said Greenawalt. He also noted that Arcadia's risk based
pricing model should result in lower expected losses from this quarters' loan
purchases. "In short, the 1998-C transaction is expected to show the same
improved performance we have seen from our last six deals," said Greenawalt.
The securities are issued via an owner trust, Arcadia Automobile
Receivables Trust, 1998-C, in three classes:
Security Amount Average Coupon Price Annual Yield
Life (yrs)
A-1 $66,000,000 0.238 5.470% 1.00000000 5.470%
A-2 $194,000,000 0.997 5.377% 1.00000000 5.512%
A-3 $340,000,000 2.881 5.670% 0.99741513 5.838%
The Class A-1 Notes will be rated A-1+ by Standard & Poor's and P-1 by
Moody's. The Class A-2 and A-3 Notes will be rated AAA by Standard & Poor's
and Aaa by Moody's. Timely principal and interest on the Notes are guaranteed
by an insurance policy provided by Financial Security Assurance Inc. ("FSA").
The ratings by Standard & Poor's and Moody's of the Notes will be based on the
issuance of the insurance policy provided by FSA.
Use of the owner trust in this transaction enables Arcadia to offer
multiple, sequential-pay securities and to prefund a portion of the trust,
thereby issuing a larger amount of securities than the amount of receivables
initially available. The Company anticipates initial delivery to the trust of
approximately $420 million in automobile loans acquired from Arcadia's network
of automobile dealers. In addition, approximately $180 million will be
available to purchase receivables to be delivered in the near future.
This news release contains forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected. The most significant among these risks and
uncertainties are (1) the level of delinquencies, gross charge-offs and net
losses, (2) the company's ability to achieve adequate interest rate spreads
and (3) the level of operating expenses. Earnings may also be affected by the
effects of economic factors on consumer debt and by competitive pressures.
Additional risks which may affect the company's future performance are
detailed under the caption "Cautionary Statements" in Exhibit 99.1 to the
company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
Arcadia Financial Ltd. is a Minneapolis-based consumer financial services
company specializing in purchasing, selling and servicing retail installment
contracts for new and used automobiles originated in 45 states. The company,
founded in 1990, is the nation's largest independent provider of automobile
financing. Its 18 Regional Buying Centers are located in Arizona; northern
and southern California; Colorado; Florida; Georgia; Maryland; Massachusetts;
Minnesota; Missouri; New York; North Carolina; Ohio; Tennessee; north, south
and west Texas; and Washington.
SOURCE Arcadia Financial Ltd.
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CONTACT:
Scott R. Fjellman, Vice President, Investor
Relations of Arcadia Financial, 612-944-4582
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