Subprime auto lender files for bankruptcy protection

The subprime loan crisis has extended beyond home mortgages, as an increasing number of people now are defaulting on their car payments.

The subprime loan crisis has extended beyond home mortgages, as an increasing number of people now are defaulting on their car payments.

As a result, C&S Finance Orlando Inc., whose niche is the subprime auto market, and its affiliate company C&S Orlando Inc. filed for Chapter 11 reorganization on June 4.

C&S Finance Orlando and C&S Orlando Inc. together sell used cars, finance them through subprime lending and provide auto maintenance services.

Subprime loans -- which typically carry higher interest rates than prime loans -- are made to people with poor or limited credit history.

Subprime auto lending became popular in the early 1990s as a way to sell cars to people who couldn't qualify for a car loan in the past. Since then, it has grown from $15 billion to $65 billion-plus in loans, Federal Reserve analysts estimate.

However, the souring economy has caused a growing number of subprime auto borrowers to stop making their car payments. Subprime auto loan delinquencies grew from 2.3 percent in August 2006 to 2.73 percent for the same month last year, says Standard & Poor's.

"We were probably a little too deep into the [subprime] market," says Marc Davis, president of C&S Orlando, which was founded in 2002.

C&S Orlando owes about $11.7 million and has assets of about $11.4 million.

The company will restructure its debt and intends to repay it, says local attorney Ryan Davis of Winderweedle, Haines, Ward & Woodman PA, who represents the firm.

In addition, C&S will provide a substantial payout to its unsecured creditors by liquidating its loan portfolio, revising its sales strategy and reducing overhead. C&S, which has auto dealerships at 2413 W. Colonial Drive and 6363 E. Colonial Drive, may sell the West Colonial property as part of the reorganization.

C&S Orlando is a franchisee of J.D. Byrider, a Carmel, Ind.-based used car and finance company franchise with 129 dealerships nationwide.

The company's primary creditor is CapitalSource Finance LLC, to which C&S owes $8.5 million. Officials there could not be reached for comment, nor could the firm's attorney, Harris B. Winsberg of Troutman Sanders in Atlanta.

C&S plans to try to restructure the CapitalSource debt and is negotiating with J.D. Byrider to restructure its franchise agreement.

Orlando Business Journal
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