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From Used Cars To The Finance Lane

Inside Wall Street


Think you have any use for a used-car dealership or its stock? Among those who probably will beg off are Merrill Lynch and Alex. Brown, two major securities firms that underwrote a 1990 stock offering for used-car company URCARCO at 19 a share. Well, the stock is now at 3 1/4, and the company is exiting from the second-hand auto business.

After suffering massive losses from its in-house financing of sales, the company changed its name to AmeriCredit and is now trying to become a consumer-finance company. What's alluring to investors is that AmeriCredit has recently attracted big investors, such as money pro Richard Rainwater, as well as UBS Asset Management and Prudential. AmeriCredit has signed a contract with Rainwater Management Partners to help steer the company into consumer financing in exchange for an option on 3.2 million shares at $3.22 a share.

"AmeriCredit is an opportunity to participate in a startup finance company at a price that's just a shade of the price of other finance companies," says David Jordan, a partner at Stamford Co., a New York securities firm. He thinks the stock will double in a year.

Analyst Frank Castle of Feeley & Willcox Asset Management says AmeriCredit's book value is nearly $5 a share and cash is $4 a share. The company will continue liquidating its 3,300-car inventory, close its used-car lots, and increase its loan portfolio for indirect financing of autos. Castle sees AmeriCredit breaking even in the year ending June, 1993, vs. a loss in the past two years. And he expects earnings of 50 cents in 1994 and $1 in 1995.GENE G. MARCIAL

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