LAS VEGAS - Consumer Portfolio Services, Inc. (NASDAQ:CPSS), a specialty finance company, has renewed its revolving credit agreement with Ares Agent Services, L.P., ensuring continued funding for its auto loan receivables.
The agreement, effective as of March 29, 2024, allows CPS to borrow against its current and future automobile receivables through March 31, 2026, with a potential amortization period extending to March 31, 2028.
The credit facility is a pivotal component of CPS's business model, which focuses on providing indirect automobile financing to individuals with limited or impaired credit histories. The company primarily acquires retail installment sales contracts from franchised auto dealerships, which are secured by late model used vehicles and, to a lesser extent, new vehicles.
CPS's ability to draw on the credit line is subject to maintaining certain standards and avoiding defaults or events that could precipitate an early termination of the revolving period or accelerate loan maturity.
Such adverse events could arise from a variety of factors, including underperforming receivables, an uptick in consumer bankruptcy filings, regulatory changes, or broader economic downturns, particularly in regions where CPS operates.
The announcement made today clarifies that while the company anticipates a two-year revolving period followed by an amortization phase, these projections are forward-looking statements. There are inherent risks that could disrupt the company's expectations, including the potential for future losses that might trigger defaults under the terms of the credit agreement.
This financial arrangement underlines CPS's continued efforts to secure the necessary capital to fund its operations and expand its portfolio of auto loans. The company services these contracts throughout their term and typically finances these purchases through the securitization markets.
This news is based on a press release statement from Consumer Portfolio Services, Inc., and provides insight into the company's latest financial activities and strategic funding plans.
InvestingPro Insights
As Consumer Portfolio Services, Inc. (NASDAQ:CPSS) secures its financial stability through the renewed credit agreement, the company's stock market performance and valuation metrics present a mixed picture.
With a market capitalization of $160.8 million, CPS is trading at a remarkably low earnings multiple, with a P/E ratio (adjusted) for the last twelve months as of Q4 2023 at 3.55. This suggests that the stock could be undervalued compared to earnings.
InvestingPro Tips indicate that CPS's stock price movements have been quite volatile, which is reflected in the price's significant decline over the past three months, with a 19.32% drop. Additionally, the company is trading near its 52-week low, currently at 55% of its 52-week high, which could indicate a potential buying opportunity for investors looking for undervalued stocks.
On the financial health front, CPS shows a solid position as its liquid assets exceed short-term obligations. This financial cushion could be crucial in maintaining operations and funding growth amidst market uncertainties.
Despite the recent revenue decline, with a -15.6% change over the last twelve months as of Q4 2023, the company remains profitable over the same period, which is a positive sign for investors.
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