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Article by DailyStocks_admin    (11-18-08 03:45 AM)

Filed with the SEC from Nov 06 to Nov 12:

Americredit (ACF)
Fairholme Capital Management said that it is in discussions with the consumer-finance company about the possibility of exchanging certain debt securities that it owns for additional Americredit shares. Fairholme is also considering buying asset-backed securities of Americredit or an affiliate.
Fairholme and Americredit also are considering an agreement under which Fairholme would refrain from taking certain actions about the company for a specified period and would acquire one seat on the board. Fairholme owns about 22.85 million shares (19.6%).
BUSINESS OVERVIEW

General

We are a leading independent auto finance company that has been operating in the automobile finance business since September 1992. We purchase auto finance contracts for new and used vehicles purchased by consumers from franchised and select independent automobile dealerships in our dealership network. We previously made loans directly to customers buying new and used vehicles and provided lease financing through our dealership network, but terminated those activities during fiscal 2008. As used herein, “loans” include auto finance contracts originated by dealers and purchased by us, without recourse. We predominantly target consumers who are typically unable to obtain financing from banks, credit unions and manufacturer captive auto finance companies. Funding for our auto lending activities is obtained through the utilization of our credit facilities and the transfer of loans in securitization transactions. We service our loan portfolio at regional centers using automated loan servicing and collection systems.

We have historically maintained a significant share of the sub-prime market and have participated in the prime and near prime sectors of the auto finance industry to a more limited extent. We source our business primarily through our relationships with auto dealers, which are maintained through our regional credit centers, marketing representatives (dealer relationship managers) and alliance relationships. We expanded our traditional niche through the acquisition of Bay View Acceptance Corporation (“BVAC”) in May 2006, which offered specialized auto finance products, including extended term financing and higher loan-to-value advances to consumers with prime credit bureau scores and our acquisition of Long Beach Acceptance Corporation (“LBAC”) in January 2007, which offered auto finance products primarily to consumers with near prime credit bureau scores. As of June 30, 2008, the operations of BVAC and LBAC have been integrated into our origination, servicing and administrative activities and we provide auto finance products solely under the AmeriCredit Financial Services, Inc. name.

Since January 2008, we have revised our operating plan in an effort to preserve and strengthen our capital and liquidity position, and to maintain sufficient capacity on our credit facilities to fund new loan originations until capital market conditions improve for securitization transactions. Under this revised plan, we increased the minimum credit score requirements for new loan originations, decreased our originations infrastructure by closing and consolidating credit center locations, selectively decreased the number of dealers from whom we purchase loans and reduced originations and support function headcounts. We have discontinued new originations in our direct lending, leasing and specialty prime platforms, certain partner relationships and in Canada. Our fiscal 2009 target for annualized loan origination levels has been reduced to approximately $3.0 billion. We recognized restructuring charges of $20.1 million for fiscal 2008, related to the closing and consolidating of credit center locations and headcount reductions.

We were incorporated in Texas on May 18, 1988, and succeeded to the business, assets and liabilities of a predecessor corporation formed under the laws of Texas on August 1, 1986. Our predecessor began operations in March 1987, and the business has been operated continuously since that time. Our principal executive offices are located at 801 Cherry Street, Suite 3900, Fort Worth, Texas, 76102 and our telephone number is (817) 302-7000.

Marketing and Loan Originations

Target Market . Our automobile lending programs are designed to serve customers who have limited access to automobile financing through banks, credit unions and the manufacturer captives. The bulk of our typical borrowers have experienced prior credit difficulties or have limited credit histories and generally have credit bureau scores ranging from 500 to 700. Because we generally serve customers who are unable to meet the credit standards imposed by most banks, credit unions and manufacturer captives, we generally charge higher interest rates than those charged by such sources. Since we provide financing in a relatively high-risk market, we also expect to sustain a higher level of credit losses than these other automobile financing sources.

Marketing . Since we are an indirect lender, we focus our marketing activities on automobile dealerships. We are selective in choosing the dealers with whom we conduct business and primarily pursue manufacturer franchised dealerships with used car operations and select independent dealerships. We prefer to finance later model, low mileage used vehicles and moderately priced new vehicles. Of the contracts purchased by us during fiscal 2008, approximately 89% were originated by manufacturer franchised dealers and 11% by select independent dealers; further, approximately 81% were used vehicles and 19% were new vehicles. We purchased contracts from 17,872 dealers during fiscal 2008. No dealer location accounted for more than 1% of the total volume of contracts purchased by us for that same period.

Prior to entering into a relationship with a dealer, we consider the dealer’s operating history and reputation in the marketplace. We then maintain a non-exclusive relationship with the dealer. This relationship is actively monitored with the objective of maximizing the volume of applications received from the dealer that meet our underwriting standards and profitability objectives. Due to the non-exclusive nature of our relationships with dealerships, the dealerships retain discretion to determine whether to obtain financing from us or from another source for a loan made by the dealership to a customer seeking to make a vehicle purchase. Our representatives regularly contact and visit dealers to solicit new business and to answer any questions dealers may have regarding our financing programs and capabilities and to explain our underwriting philosophy. To increase the effectiveness of these contacts, marketing personnel have access to our management information systems which detail current information regarding the number of applications submitted by a dealership, our response and the reasons why a particular application was rejected.

We purchase finance contracts without recourse to the dealer. Accordingly, the dealer has no liability to us if the consumer defaults on the contract. Although finance contracts are purchased without recourse to the dealer, the dealer typically makes certain representations as to the validity of the contract and compliance with certain laws, and indemnifies us against any claims, defenses and set-offs that may be asserted against us because of assignment of the contract or the condition of the underlying collateral. Recourse based upon those representations and indemnities would be limited in circumstances in which the dealer has insufficient financial resources to perform upon such representations and indemnities. We do not view recourse against the dealer on these representations and indemnities to be of material significance in our decision to purchase finance contracts from a dealer. Depending upon the contract structure and consumer credit attributes, we may charge dealers a non-refundable acquisition fee or pay dealers a participation fee when purchasing finance contracts. These fees are assessed on a contract-by-contract basis.

Origination Network . Our originations platform provides specialized focus on marketing and underwriting loans. Responsibilities are segregated so that the sales group markets our programs and products to our dealer customers, while the underwriting group focuses on underwriting, negotiating and closing loans.

We use a combination of a credit centers and dealer relationship managers to market our indirect financing programs to selected dealers, develop relationships with these dealers and underwrite contracts submitted by the dealerships. We believe that the personal relationships our credit underwriters and dealer relationship managers establish with the dealership staff are an important factor in creating and maintaining productive relationships with our dealer customer base.

We select markets for credit center locations based upon numerous factors, including demographic trends and data, competitive conditions, regulatory environment and availability of qualified personnel. Credit centers are typically situated in suburban office buildings that are accessible to dealers.

Regional credit managers and credit underwriters staff credit center locations. Branch personnel are compensated with base salaries and incentives based on corporate performance and overall branch performance, including factors such as loan credit quality, loan pricing adequacy and loan volume objectives.

Regional vice presidents monitor credit center compliance with our underwriting guidelines. Our management information systems provide the regional vice presidents with access to credit application information enabling them to consult with the credit underwriters and on credit decisions and review exceptions to our underwriting guidelines. The regional vice presidents also make periodic visits to the credit centers to conduct operational reviews.

Dealer relationship managers are either based in a credit center or work from a home office. Dealer relationship managers solicit dealers for applications and maintain our relationships with the dealers in their geographic vicinity, but do not have responsibility for credit approvals. We believe the local presence provided by our dealer relationship managers enables us to be more responsive to dealer concerns and local market conditions. Finance contracts solicited by the dealer relationship managers are underwritten at a credit center or at our national loan processing center. The dealer relationship managers are compensated with base salaries and incentives based on loan volume objectives and the generation of credit applications from dealerships that meet our underwriting criteria. The dealer relationship managers report to regional sales managers.

Credit Underwriting

We utilize a proprietary credit scoring system to support the credit approval process. The credit scoring system was developed through statistical analysis of our consumer demographic and portfolio databases. Credit scoring is used to differentiate credit applicants and to rank order credit risk in terms of expected default rates, which enables us to evaluate credit applications for approval and tailor loan pricing and structure according to this statistical assessment of credit risk. For example, a consumer with a lower score would indicate a higher probability of default and, therefore, we would either decline the application, or, if approved, compensate for this higher default risk through the structuring and pricing of the loan. While we employ a credit scoring system in the credit approval process, credit scoring does not eliminate credit risk. Adverse determinations in evaluating contracts for purchase or changes in certain macroeconomic factors could negatively affect the credit quality of our receivables portfolio.

The credit scoring system considers data contained in the customer’s credit application and credit bureau report as well as the structure of the proposed loan and produces a statistical assessment of these attributes. This assessment is used to segregate applicant risk profiles and determine whether the risk is acceptable and the price we should charge for that risk. Our credit scorecards are monitored through comparison of actual versus projected performance by score. Periodically, we endeavor to refine our proprietary scorecards based on new information including identified correlations between receivables performance and data obtained in the underwriting process.

We purchase individual contracts through our underwriting specialists in credit centers using a credit approval process tailored to local market conditions. Underwriting personnel have a specific credit authority based upon their experience and historical loan portfolio results as well as established credit scoring parameters. Contracts may also be underwritten through our national loan processing center for specific dealers requiring centralized service, in certain markets where a credit center is not present or, in some cases, outside of normal credit center working hours. Although the credit approval process is decentralized, our application processing system includes controls designed to ensure that credit decisions comply with our credit scoring strategies and underwriting policies and procedures.

Finance contract application packages completed by prospective obligors are received electronically, through web-based platforms, or Internet portals, that automate and accelerate the financing process. Upon receipt or entry of application data into our application processing system, a credit bureau report is automatically accessed and a credit score is computed. A substantial percentage of the applications received by us fail to meet our credit score requirement and are automatically declined. For applications that are not automatically declined, our underwriting personnel review the application package and determine whether to approve the application, approve the application subject to conditions that must be met, or deny the application. The credit decision is based primarily on the applicant’s credit score determined by our proprietary credit scoring system. We estimate that approximately 20-30% of applicants will be approved for credit by us. Dealers are contacted regarding credit decisions electronically or by facsimile. Declined applicants are also provided with appropriate notification of the decision.

Our underwriting and collateral guidelines, including credit scoring parameters, form the basis for the credit decision. Exceptions to credit policies and authorities must be approved by designated individuals with appropriate credit authority. Additionally, our centralized credit risk management department monitors exceptions and adherence to underwriting guidelines, procedures and appropriate approval levels.

Completed contract packages are sent to us by dealers. Loan documentation is scanned to create electronic images and electronically forwarded to our centralized loan processing department. A loan processing representative verifies certain applicant employment, income and residency information when



required by our credit policies. Loan terms, insurance coverage and other information may be verified or confirmed with the customer. The original documents are subsequently sent to our centralized account services department and critical documents are stored in a fire resistant vault.

Once cleared for funding, the funds are electronically transferred to the dealer or a check is issued. Upon funding of the contract, we acquire a perfected security interest in the automobile that was financed. Daily loan reports are generated for review by senior operations management. All of our contracts are fully amortizing with substantially equal monthly installments. Key variables, such as loan applicant data, credit bureau and credit score information, loan structures and terms and payment histories are tracked. The credit risk management function also regularly reviews the performance of our credit scoring system and is responsible for the development and enhancement of our credit scorecards.

Credit indicator packages with portfolio performance at various levels of detail including total company, credit center and dealer are prepared regularly and reviewed. Various daily reports and analytical data are also generated to monitor credit quality as well as to refine the structure and mix of new loan originations. We review portfolio returns on a consolidated basis, as well as at the credit center, origination channel, dealer and contract levels.


CEO BACKGROUND

General

We are a leading independent auto finance company that has been operating in the automobile finance business since September 1992. We purchase auto finance contracts for new and used vehicles purchased by consumers from franchised and select independent automobile dealerships in our dealership network. We previously made loans directly to customers buying new and used vehicles and provided lease financing through our dealership network, but terminated those activities during fiscal 2008. As used herein, “loans” include auto finance contracts originated by dealers and purchased by us, without recourse. We predominantly target consumers who are typically unable to obtain financing from banks, credit unions and manufacturer captive auto finance companies. Funding for our auto lending activities is obtained through the utilization of our credit facilities and the transfer of loans in securitization transactions. We service our loan portfolio at regional centers using automated loan servicing and collection systems.

We have historically maintained a significant share of the sub-prime market and have participated in the prime and near prime sectors of the auto finance industry to a more limited extent. We source our business primarily through our relationships with auto dealers, which are maintained through our regional credit centers, marketing representatives (dealer relationship managers) and alliance relationships. We expanded our traditional niche through the acquisition of Bay View Acceptance Corporation (“BVAC”) in May 2006, which offered specialized auto finance products, including extended term financing and higher loan-to-value advances to consumers with prime credit bureau scores and our acquisition of Long Beach Acceptance Corporation (“LBAC”) in January 2007, which offered auto finance products primarily to consumers with near prime credit bureau scores. As of June 30, 2008, the operations of BVAC and LBAC have been integrated into our origination, servicing and administrative activities and we provide auto finance products solely under the AmeriCredit Financial Services, Inc. name.

Since January 2008, we have revised our operating plan in an effort to preserve and strengthen our capital and liquidity position, and to maintain sufficient capacity on our credit facilities to fund new loan originations until capital market conditions improve for securitization transactions. Under this revised plan, we increased the minimum credit score requirements for new loan originations, decreased our originations infrastructure by closing and consolidating credit center locations, selectively decreased the number of dealers from whom we purchase loans and reduced originations and support function headcounts. We have discontinued new originations in our direct lending, leasing and specialty prime platforms, certain partner relationships and in Canada. Our fiscal 2009 target for annualized loan origination levels has been reduced to approximately $3.0 billion. We recognized restructuring charges of $20.1 million for fiscal 2008, related to the closing and consolidating of credit center locations and headcount reductions.

We were incorporated in Texas on May 18, 1988, and succeeded to the business, assets and liabilities of a predecessor corporation formed under the laws of Texas on August 1, 1986. Our predecessor began operations in March 1987, and the business has been operated continuously since that time. Our principal executive offices are located at 801 Cherry Street, Suite 3900, Fort Worth, Texas, 76102 and our telephone number is (817) 302-7000.

Marketing and Loan Originations

Target Market . Our automobile lending programs are designed to serve customers who have limited access to automobile financing through banks, credit unions and the manufacturer captives. The bulk of our typical borrowers have experienced prior credit difficulties or have limited credit histories and generally have credit bureau scores ranging from 500 to 700. Because we generally serve customers who are unable to meet the credit standards imposed by most banks, credit unions and manufacturer captives, we generally charge higher interest rates than those charged by such sources. Since we provide financing in a relatively high-risk market, we also expect to sustain a higher level of credit losses than these other automobile financing sources.

Marketing . Since we are an indirect lender, we focus our marketing activities on automobile dealerships. We are selective in choosing the dealers with whom we conduct business and primarily pursue manufacturer franchised dealerships with used car operations and select independent dealerships. We prefer to finance later model, low mileage used vehicles and moderately priced new vehicles. Of the contracts purchased by us during fiscal 2008, approximately 89% were originated by manufacturer franchised dealers and 11% by select independent dealers; further, approximately 81% were used vehicles and 19% were new vehicles. We purchased contracts from 17,872 dealers during fiscal 2008. No dealer location accounted for more than 1% of the total volume of contracts purchased by us for that same period.

Prior to entering into a relationship with a dealer, we consider the dealer’s operating history and reputation in the marketplace. We then maintain a non-exclusive relationship with the dealer. This relationship is actively monitored with the objective of maximizing the volume of applications received from the dealer that meet our underwriting standards and profitability objectives. Due to the non-exclusive nature of our relationships with dealerships, the dealerships retain discretion to determine whether to obtain financing from us or from another source for a loan made by the dealership to a customer seeking to make a vehicle purchase. Our representatives regularly contact and visit dealers to solicit new business and to answer any questions dealers may have regarding our financing programs and capabilities and to explain our underwriting philosophy. To increase the effectiveness of these contacts, marketing personnel have access to our management information systems which detail current information regarding the number of applications submitted by a dealership, our response and the reasons why a particular application was rejected.

We purchase finance contracts without recourse to the dealer. Accordingly, the dealer has no liability to us if the consumer defaults on the contract. Although finance contracts are purchased without recourse to the dealer, the dealer typically makes certain representations as to the validity of the contract and compliance with certain laws, and indemnifies us against any claims, defenses and set-offs that may be asserted against us because of assignment of the contract or the condition of the underlying collateral. Recourse based upon those representations and indemnities would be limited in circumstances in which the dealer has insufficient financial resources to perform upon such representations and indemnities. We do not view recourse against the dealer on these representations and indemnities to be of material significance in our decision to purchase finance contracts from a dealer. Depending upon the contract structure and consumer credit attributes, we may charge dealers a non-refundable acquisition fee or pay dealers a participation fee when purchasing finance contracts. These fees are assessed on a contract-by-contract basis.

Origination Network . Our originations platform provides specialized focus on marketing and underwriting loans. Responsibilities are segregated so that the sales group markets our programs and products to our dealer customers, while the underwriting group focuses on underwriting, negotiating and closing loans.

We use a combination of a credit centers and dealer relationship managers to market our indirect financing programs to selected dealers, develop relationships with these dealers and underwrite contracts submitted by the dealerships. We believe that the personal relationships our credit underwriters and dealer relationship managers establish with the dealership staff are an important factor in creating and maintaining productive relationships with our dealer customer base.

We select markets for credit center locations based upon numerous factors, including demographic trends and data, competitive conditions, regulatory environment and availability of qualified personnel. Credit centers are typically situated in suburban office buildings that are accessible to dealers.

Regional credit managers and credit underwriters staff credit center locations. Branch personnel are compensated with base salaries and incentives based on corporate performance and overall branch performance, including factors such as loan credit quality, loan pricing adequacy and loan volume objectives.

Regional vice presidents monitor credit center compliance with our underwriting guidelines. Our management information systems provide the regional vice presidents with access to credit application information enabling them to consult with the credit underwriters and on credit decisions and review exceptions to our underwriting guidelines. The regional vice presidents also make periodic visits to the credit centers to conduct operational reviews.

Dealer relationship managers are either based in a credit center or work from a home office. Dealer relationship managers solicit dealers for applications and maintain our relationships with the dealers in their geographic vicinity, but do not have responsibility for credit approvals. We believe the local presence provided by our dealer relationship managers enables us to be more responsive to dealer concerns and local market conditions. Finance contracts solicited by the dealer relationship managers are underwritten at a credit center or at our national loan processing center. The dealer relationship managers are compensated with base salaries and incentives based on loan volume objectives and the generation of credit applications from dealerships that meet our underwriting criteria. The dealer relationship managers report to regional sales managers.

Credit Underwriting

We utilize a proprietary credit scoring system to support the credit approval process. The credit scoring system was developed through statistical analysis of our consumer demographic and portfolio databases. Credit scoring is used to differentiate credit applicants and to rank order credit risk in terms of expected default rates, which enables us to evaluate credit applications for approval and tailor loan pricing and structure according to this statistical assessment of credit risk. For example, a consumer with a lower score would indicate a higher probability of default and, therefore, we would either decline the application, or, if approved, compensate for this higher default risk through the structuring and pricing of the loan. While we employ a credit scoring system in the credit approval process, credit scoring does not eliminate credit risk. Adverse determinations in evaluating contracts for purchase or changes in certain macroeconomic factors could negatively affect the credit quality of our receivables portfolio.

The credit scoring system considers data contained in the customer’s credit application and credit bureau report as well as the structure of the proposed loan and produces a statistical assessment of these attributes. This assessment is used to segregate applicant risk profiles and determine whether the risk is acceptable and the price we should charge for that risk. Our credit scorecards are monitored through comparison of actual versus projected performance by score. Periodically, we endeavor to refine our proprietary scorecards based on new information including identified correlations between receivables performance and data obtained in the underwriting process.

We purchase individual contracts through our underwriting specialists in credit centers using a credit approval process tailored to local market conditions. Underwriting personnel have a specific credit authority based upon their experience and historical loan portfolio results as well as established credit scoring parameters. Contracts may also be underwritten through our national loan processing center for specific dealers requiring centralized service, in certain markets where a credit center is not present or, in some cases, outside of normal credit center working hours. Although the credit approval process is decentralized, our application processing system includes controls designed to ensure that credit decisions comply with our credit scoring strategies and underwriting policies and procedures.

Finance contract application packages completed by prospective obligors are received electronically, through web-based platforms, or Internet portals, that automate and accelerate the financing process. Upon receipt or entry of application data into our application processing system, a credit bureau report is automatically accessed and a credit score is computed. A substantial percentage of the applications received by us fail to meet our credit score requirement and are automatically declined. For applications that are not automatically declined, our underwriting personnel review the application package and determine whether to approve the application, approve the application subject to conditions that must be met, or deny the application. The credit decision is based primarily on the applicant’s credit score determined by our proprietary credit scoring system. We estimate that approximately 20-30% of applicants will be approved for credit by us. Dealers are contacted regarding credit decisions electronically or by facsimile. Declined applicants are also provided with appropriate notification of the decision.

Our underwriting and collateral guidelines, including credit scoring parameters, form the basis for the credit decision. Exceptions to credit policies and authorities must be approved by designated individuals with appropriate credit authority. Additionally, our centralized credit risk management department monitors exceptions and adherence to underwriting guidelines, procedures and appropriate approval levels.

Completed contract packages are sent to us by dealers. Loan documentation is scanned to create electronic images and electronically forwarded to our centralized loan processing department. A loan processing representative verifies certain applicant employment, income and residency information when



required by our credit policies. Loan terms, insurance coverage and other information may be verified or confirmed with the customer. The original documents are subsequently sent to our centralized account services department and critical documents are stored in a fire resistant vault.

Once cleared for funding, the funds are electronically transferred to the dealer or a check is issued. Upon funding of the contract, we acquire a perfected security interest in the automobile that was financed. Daily loan reports are generated for review by senior operations management. All of our contracts are fully amortizing with substantially equal monthly installments. Key variables, such as loan applicant data, credit bureau and credit score information, loan structures and terms and payment histories are tracked. The credit risk management function also regularly reviews the performance of our credit scoring system and is responsible for the development and enhancement of our credit scorecards.

Credit indicator packages with portfolio performance at various levels of detail including total company, credit center and dealer are prepared regularly and reviewed. Various daily reports and analytical data are also generated to monitor credit quality as well as to refine the structure and mix of new loan originations. We review portfolio returns on a consolidated basis, as well as at the credit center, origination channel, dealer and contract levels.


PRESTON A. MILLER has been Executive Vice President, Co-Chief Operating Officer since August 2007 and had been Executive Vice President, Chief Operating Officer for Originations since January 2005. Prior to that, he was Executive Vice President, Chief Financial Officer and Treasurer from April 2003 to January 2005. Mr. Miller was Executive Vice President, Treasurer from July 1998 until April 2003. Mr. Miller joined us in 1989.


MANAGEMENT DISCUSSION FROM LATEST 10K

GENERAL

We are a leading independent auto finance company specializing in purchasing retail automobile installment sales contracts originated by franchised and select independent dealers in connection with the sale of used and new automobiles. We generate revenue and cash flows primarily through the purchase, retention, subsequent securitization and servicing of finance receivables. As used herein, “loans” include auto finance receivables originated by dealers and purchased by us. To fund the acquisition of receivables prior to securitization and to fund the repurchase of receivables pursuant to clean-up call options, we use available cash and borrowings under our credit facilities. We earn finance charge income on the finance receivables and pay interest expense on borrowings under our credit facilities.

We, through wholly-owned subsidiaries, periodically transfer receivables to securitization trusts (“Trusts”) that issue asset-backed securities to investors. We retain an interest in these securitization transactions in the form of restricted cash accounts and overcollateralization whereby more receivables are transferred to the Trusts than the amount of asset-backed securities issued by the Trusts as well as the estimated future excess cash flows expected to be received by us over the life of the securitization. Excess cash flows result from the difference between the finance charges received from the obligors on the receivables and the interest paid to investors in the asset-backed securities, net of credit losses and expenses.

Excess cash flows from the Trusts are initially utilized to fund credit enhancement requirements in order to attain specific credit ratings for the asset-backed securities issued by the Trusts. Once predetermined credit enhancement requirements are reached and maintained, excess cash flows are distributed to us, or in a securitization utilizing a senior subordinated structure, may be used to accelerate the repayment of certain subordinated securities. In addition to excess cash flows, we receive monthly base servicing fees and we collect other fees, such as late charges, as servicer for securitization Trusts. For securitization transactions that involve the purchase of a financial guaranty insurance policy, credit enhancement requirements will increase if targeted portfolio performance ratios are exceeded. Excess cash flows otherwise distributable to us from Trusts in which the portfolio performance ratios were exceeded and from other Trusts which may be subject to limited cross-collateralization provisions are accumulated in the Trusts until such higher levels of credit enhancement are reached and maintained. Senior subordinated securitizations typically do not utilize portfolio performance ratios.

We structure our securitization transactions as secured financings. Accordingly, following a securitization, the finance receivables and the related securitization notes payable remain on the consolidated balance sheets. We recognize finance charge and fee income on the receivables and interest expense on the securities issued in the securitization transaction and record a provision for loan losses to cover probable loan losses on the receivables.

Recent Developments

We anticipate a number of factors will continue to adversely affect our liquidity in fiscal 2009: higher credit enhancement levels in our securitization transactions caused by a reduction in excess spread due to a higher cost of funds and due to credit deterioration we are experiencing in our portfolio; unprecedented disruptions in the capital markets making the execution of securitization transactions more challenging and expensive and decreasing cash distributions from our securitization Trusts due to weaker credit performance.

Since January 2008, we have revised our operating plan in an effort to preserve and strengthen our capital and liquidity position, and to maintain sufficient capacity on our credit facilities to fund new loan originations until capital market conditions improve for securitization transactions. Under this revised plan, we increased the minimum credit score requirements for new loan originations, decreased our originations infrastructure by closing and consolidating credit center locations, selectively decreased the number of dealers from whom we purchase loans and reduced originations and support function headcounts. We have discontinued new originations in our direct lending, leasing and specialty prime platforms, certain partner relationships, and in Canada. Our origination target has been reduced to approximately $100 million per month. We recognized a restructuring charge of $0.6 million during the three months ended September 30, 2008.

We believe that we have sufficient liquidity and warehouse capacity to operate under this plan through fiscal 2009 assuming the completion of at least one additional securitization transaction on similar terms as the AmeriCredit Automobile Receivable Trust (“AMCAR”) 2008-1. We intend to utilize the forward purchase commitment with Deutsche Bank AG, Cayman Islands Branch (“Deutsche”) to place the triple-A rated asset-backed securities in such a securitization transaction. Additionally, we are currently negotiating with a significant shareholder concerning the acquisition of subordinated securities of such a securitization transaction, as well as the exchange of certain of our unsecured debt securities for additional shares of our common stock. If this transaction is consummated on the terms presently being discussed, such significant shareholder will acquire one seat on our board and we will waive the application of the Texas business combination law. However, if we are unable to complete the above mentioned transaction with this shareholder and the asset-backed securities market or the credit markets, in general, continue to deteriorate we may be unable to place the subordinated securities on acceptable terms or at all. In addition, if we breach any of the covenants in our forward purchase commitment, we maybe be unable to place the triple-A rated asset-backed securities. Our credit facilities also contain covenants, which if breached, could restrict our ability to borrow under such facilities to fund new loan originations, or in a worst case, could result in events of default under most of our debt agreements. Failure to complete a securitization transaction or the inability to access our credit facilities would raise substantial doubt about our ability to continue as a going concern.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2008 as compared to Three Months Ended September 30, 2007

The decrease in loans purchased during the three months ended September 30, 2008, as compared to the three months ended September 30, 2007, was primarily due to the implementation of the revised operating plan.

The average new loan size decreased to $17,773 for the three months ended September 30, 2008, from $19,159 for the three months ended September 30, 2007, due to reduced purchases of prime/near prime loans under the revised operating plan. The average annual percentage rate for finance receivables purchased during the three months ended September 30, 2008, increased to 16.6% from 15.4% during the three months ended September 30, 2007, due to increased new loan pricing as a result of higher funding costs.

Net Margin:

Net margin is the difference between finance charge and other income earned on our receivables and the cost to fund the receivables as well as the cost of debt incurred for general corporate purposes.

The decrease in net margin for the three months ended September 30, 2008, as compared to the three months ended September 30, 2007, was a result of the lower effective yield due to a greater proportion of prime/near prime loans purchased prior to implementation of the revised operating plan, combined with a higher percentage of finance receivables being in non-accrual status.

Revenue:

Finance charge income decreased by 12.7% to $534.0 million for the three months ended September 30, 2008, from $611.9 million for the three months ended September 30, 2007, primarily due to the 10.2% decrease in average finance receivables. The effective yield on our finance receivables decreased to 14.5% for the three months ended September 30, 2008, from 15.0% for the three months ended September 30, 2007. The effective yield represents finance charges and fees taken into earnings during the period as a percentage of average finance receivables and may be lower than the contractual rates of our finance contracts due to finance receivables in nonaccrual status.

Investment income decreased as a result of lower invested cash balances and lower investment rates combined with a $3.5 million loss on our investment in the Reserve Primary Money Market Fund (“the Reserve Fund”).

Costs and Expenses:

Operating Expenses

Operating expenses decreased by 19.7% to $84.3 million for the three months ended September 30, 2008, from $105.0 million for the three months ended September 30, 2007, as a result of cost savings from the revised operating plan. Our operating expenses are predominately related to personnel costs that include base salary and wages, performance incentives and benefits as well as related employment taxes. Personnel costs represented 70.9% and 77.1% of total operating expenses for the three months ended September 30, 2008 and 2007, respectively.

Operating expenses as an annualized percentage of average finance receivables were 2.3% for the three months ended September 30, 2008, as compared to 2.6% for the three months ended September 30, 2007.

Provision for Loan losses

Provisions for loan losses are charged to income to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the portfolio of finance receivables. The provision for loan losses recorded for the three months ended September 30, 2008 and 2007, reflects inherent losses on receivables originated during those quarters and changes in the amount of inherent losses on receivables originated in prior periods. The provision for loan losses increased to $274.9 million for the three months ended September 30, 2008, from $244.6 million for the three months ended September 30, 2007, as a result of weaker credit performance from loans originated in calendar years 2006 and 2007, as well as higher expected future losses due to weaker economic conditions. As an annualized percentage of average finance receivables, the provision for loan losses was 7.5% and 6.0% for the three months ended September 30, 2008 and 2007, respectively.

Interest Expense

Interest expense decreased to $195.0 million for the three months ended September 30, 2008, from $211.3 million for the three months ended September 30, 2007. Average debt outstanding was $13,557.8 million and $15,373.4 million for the three months ended September 30, 2008 and 2007, respectively. Our effective rate of interest paid on our debt increased to 5.7% for the three months ended September 30, 2008, compared to 5.5% for the three months ended September 30, 2007, due to an increase in market interest rates and principal paydown of older securitizations with lower interest cost.

Taxes

Our effective income tax rate was 503.2% and 28.4% for the three months ended September 30, 2008 and 2007, respectively. The rate for the three months ended September 30, 2008, is primarily a result of the relationship between increases in prior year contingent interest and penalties in relation to income before income taxes. The rate for the three months ended September 30, 2007, reflected a revised estimate of deferred tax assets and liabilities relating to state income tax rates and the exercise of warrants issued in September 2002.


GENERAL

We are a leading independent auto finance company specializing in purchasing retail automobile installment sales contracts originated by franchised and select independent dealers in connection with the sale of used and new automobiles. We generate revenue and cash flows primarily through the purchase, retention, subsequent securitization and servicing of finance receivables. As used herein, “loans” include auto finance receivables originated by dealers and purchased by us. To fund the acquisition of receivables prior to securitization and to fund the repurchase of receivables pursuant to clean-up call options, we use available cash and borrowings under our credit facilities. We earn finance charge income on the finance receivables and pay interest expense on borrowings under our credit facilities.

We, through wholly-owned subsidiaries, periodically transfer receivables to securitization trusts (“Trusts”) that issue asset-backed securities to investors. We retain an interest in these securitization transactions in the form of restricted cash accounts and overcollateralization, whereby more receivables are transferred to the Trusts than the amount of asset-backed securities issued by the Trusts, as well as the estimated future excess cash flows expected to be received by us over the life of the securitization. Excess cash flows result from the difference between the finance charges received from the obligors on the receivables and the interest paid to investors in the asset-backed securities, net of credit losses and expenses.

Excess cash flows from the Trusts are initially utilized to fund credit enhancement requirements in order to attain specific credit ratings for the asset-backed securities issued by the Trusts. Once predetermined credit enhancement requirements are reached and maintained, excess cash flows are distributed to us or, in a securitization utilizing a senior subordinated structure, may be used to accelerate the repayment of certain subordinated securities. In addition to excess cash flows, we receive monthly base servicing fees and we collect other fees, such as late charges, as servicer for securitization Trusts. For securitization transactions that involve the purchase of a financial guaranty insurance policy, credit enhancement requirements will increase if targeted portfolio performance ratios are exceeded. Excess cash flows otherwise distributable to us from Trusts in which the portfolio performance ratios were exceeded and from other Trusts which may be subject to limited cross-collateralization provisions are accumulated in the Trusts until such higher levels of credit enhancement are reached and maintained. Senior subordinated securitizations typically do not utilize portfolio performance ratios.

We structure our securitization transactions as secured financings. Accordingly, following a securitization, the finance receivables and the related securitization notes payable remain on the consolidated balance sheets. We recognize finance charge and fee income on the receivables and interest expense on the securities issued in the securitization transaction and record a provision for loan losses to cover probable loan losses on the receivables.

Prior to October 1, 2002, securitization transactions were structured as sales of finance receivables. We also acquired two securitization Trusts which were accounted for as sales of finance receivables. Receivables sold under this structure are referred to herein as “gain on sale receivables.” At June 30, 2008, we had no outstanding gain on sale securitizations.

On May 1, 2006, we acquired the stock of Bay View Acceptance Corporation (“BVAC”). BVAC served auto dealers in 32 states offering specialized auto finance products, including extended term financing and higher loan-to-value advances to consumers with prime credit bureau scores.

On January 1, 2007, we acquired the stock of Long Beach Acceptance Corporation (“LBAC”). LBAC served auto dealers in 34 states offering auto finance products primarily to consumers with near prime credit bureau scores.

As of June 30, 2008, the operations of BVAC and LBAC have been integrated into our origination, servicing and administrative activities and we provide auto finance products solely under the AmeriCredit Financial Services, Inc. name.

Since January 2008, we have revised our operating plan in an effort to preserve and strengthen our capital and liquidity position, and to maintain sufficient capacity on our credit facilities to fund new loan originations until capital market conditions improve for securitization transactions. Under this revised plan, we increased the minimum credit score requirements for new loan originations, decreased our originations infrastructure by closing and consolidating credit center locations, selectively decreased the number of dealers from whom we purchase loans and reduced originations and support function headcounts. We have discontinued new originations in our direct lending, leasing and specialty prime platforms, certain partner relationships, and in Canada. Our fiscal 2009 target for annualized loan origination levels has been reduced to approximately $3.0 billion. We recognized restructuring charges of $20.1 million for fiscal 2008, related to the closing and consolidating of credit center locations and headcount reductions.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the amount of revenue and costs and expenses during the reporting periods. Actual results could differ from those estimates and those differences may be material. The accounting estimates that we believe are the most critical to understanding and evaluating our reported financial results include the following:

Allowance for loan losses

The allowance for loan losses is established systematically based on the determination of the amount of probable credit losses inherent in the finance receivables as of the reporting date. We review charge-off experience factors, delinquency reports, historical collection rates, estimates of the value of the underlying collateral, economic trends, such as unemployment rates, and other information in order to make the necessary judgments as to the probable credit losses. We also use historical charge-off experience to determine a loss confirmation period, which is defined as the time between when an event, such as delinquency status, giving rise to a probable credit loss occurs with respect to a specific account and when such account is charged off. This loss confirmation period is applied to the forecasted probable credit losses to determine the amount of losses inherent in finance receivables at the reporting date. Assumptions regarding credit losses and loss confirmation periods are reviewed periodically and may be impacted by actual performance of finance receivables and changes in any of the factors discussed above. Should the credit loss assumption or loss confirmation period increase, there would be an increase in the amount of allowance for loan losses required, which would decrease the net carrying value of finance receivables and increase the amount of provision for loan losses recorded on the consolidated statements of operations and comprehensive operations.

Income Taxes

We are subject to income tax in the United States and Canada. In the ordinary course of our business, there may be transactions, calculations, structures and filing positions where the ultimate tax outcome is uncertain. At any point in time, multiple tax years are subject to audit by various taxing jurisdictions and we record liabilities for anticipated tax issues based on the requirements of Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes–an interpretation of FASB Statement 109. Management believes that the estimates are reasonable. However, due to expiring statutes of limitations, audits, settlements, changes in tax law or new authoritative rulings, no assurance can be given that the final outcome of these matters will be comparable to what was reflected in the historical income tax provisions and accruals. We may need to adjust our accrued tax assets or liabilities if actual results differ from estimated results or if we adjust these assumptions in the future, which could materially impact the effective tax rate, earnings, accrued tax balances and cash.

As a part of our financial reporting process, we must assess the likelihood that our deferred tax assets can be recovered. If recovery is not likely, the provision for taxes must be increased by recording a reserve in the form of a valuation allowance for the deferred tax assets that are estimated to be unrecoverable. In this process, certain criteria are evaluated including the existence of deferred tax liabilities that can be used to absorb deferred tax assets, taxable income in prior carryback years that can be used to absorb net operating losses, credit carrybacks, and estimated taxable income in future years. Based upon our earnings history and earnings projections, management believes it is more likely than not that the tax benefits of the asset will be fully realized. Accordingly, no valuation allowance has been provided on deferred taxes. Our judgment regarding future taxable income may change due to future market conditions, changes in U.S. or international tax laws and other factors. These changes, if any, may require adjustments to these deferred tax assets and an accompanying reduction or increase in net income in the period in which such determinations are made.

Since July 1, 2007, we have accounted for uncertainty in income taxes recognized in the financial statements in accordance with FIN 48. FIN 48 requires that a more-likely-than-not threshold be met before the benefit of a tax position may be recognized in the financial statements and prescribes how such benefit should be measured. It also provides guidance on derecognition, classification, accrual of interest and penalties, accounting in interim periods, disclosure and transition.

RESULTS OF OPERATIONS

Year Ended June 30, 2008 as compared to Year Ended June 30, 2007

Changes in Finance Receivables

The decrease in loans purchased during fiscal 2008 as compared to fiscal 2007 was primarily due to the implementation of the revised operating plan, which reduced origination levels to an annualized rate of approximately $3.0 billion by June 30, 2008. The increase in liquidations and other resulted primarily from higher collections and charge-offs on finance receivables due to the increase in average finance receivables.

The average new loan size increased to $19,093 for fiscal 2008 from $18,506 for fiscal 2007. The average annual percentage rate for finance receivables purchased during fiscal 2008 decreased to 15.4% from 15.8% during fiscal 2007 due to a generally higher quality mix of loans purchased in fiscal 2008 with lower relative annual percentage rates.

Net Margin

Net margin is the difference between finance charge and other income earned on our receivables and the cost to fund the receivables as well as the cost of debt incurred for general corporate purposes. The decrease in net margin for fiscal 2008, as compared to fiscal 2007, was a result of the lower effective yield due to a shift to a higher quality mix in the portfolio, combined with an increase in interest expense caused by a continued amortization of older securitizations with lower market interest costs.

Revenue

Finance charge income increased by 11.2% to $2,382.5 million for fiscal 2008 from $2,142.5 million for fiscal 2007, primarily due to the increase in average finance receivables. The effective yield on our finance receivables decreased to 14.8% for fiscal 2008 from 15.7% for fiscal 2007. The effective yield represents finance charges and fees taken into earnings during the period as a percentage of average finance receivables and is lower than the contractual rates of our auto finance contracts due to finance receivables in nonaccrual status.

Investment income decreased as a result of lower invested cash balances combined with lower investment rates.

Costs and Expenses

Operating Expenses

Operating expenses increased to $434.2 million for fiscal 2008 from $399.7 million for fiscal 2007, as a result of higher average finance receivables outstanding, which were offset in part by cost savings resulting from the revised operating plan. Our operating expenses are predominately related to personnel costs that include base salary and wages, performance incentives and benefits as well as related employment taxes. Personnel costs represented 72.7% and 76.2% of total operating expenses for fiscal 2008 and 2007, respectively.

Operating expenses as an annualized percentage of average finance receivables were 2.7% for fiscal 2008, as compared to 2.9% for fiscal 2007. The decrease in operating expenses as an annualized percentage of average finance receivables primarily resulted from cost synergies realized from the integration of LBAC, as well as cost savings resulting from the revised operating plan.

Provision for Loan Losses

Provisions for loan losses are charged to income to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the portfolio of finance receivables. The provision for loan losses recorded for fiscal 2008 and 2007 reflects inherent losses on receivables originated during those periods and changes in the amount of inherent losses on receivables originated in prior periods. The provision for loan losses increased to $1,131.0 million for fiscal 2008 from $727.7 million for fiscal 2007 as a result of weaker credit performance from the LBAC portfolio and sub-prime loans originated in calendar years 2006 and 2007 as well as higher expected future losses due to weaker economic conditions, particularly in certain geographic areas, including Florida and Southern California. As an annualized percentage of average finance receivables, the provision for loan losses was 7.0% and 5.3% for fiscal 2008 and 2007, respectively.

Interest Expense

Interest expense increased to $837.4 million for fiscal 2008 from $680.8 million for fiscal 2007. Average debt outstanding was $15,207.0 million and $12,925.6 million for fiscal 2008 and 2007, respectively. Our effective rate of interest paid on our debt increased to 5.5% for fiscal 2008 compared to 5.3% for fiscal 2007, due to an increase in market interest rates and a continued amortization of older securitizations with lower interest costs.

Goodwill Impairment

The primary cause of the goodwill impairment is the decline in our market capitalization, which declined 13.6 percent from March 31, 2008, to $1,002.6 million at June 30, 2008. The decline, which is consistent with market capitalization declines experienced by other financial services companies over the same time period, was caused by investor concerns over external factors, including the capital market dislocations and the impact of weakening economic conditions on consumer loan portfolios.

Taxes

Our effective income tax rate was 24.8% and 32.3% for fiscal 2008 and 2007, respectively. The lower effective tax rate in fiscal 2008 resulted primarily from the negative rate effect of no longer being permanently reinvested with respect to its Canadian subsidiaries as of June 30, 2008 of 15.3%, the negative rate effect of an impairment of non-deductible goodwill of 3.2%, the negative rate effect of FIN 48 uncertain tax positions of 7.4% and the positive rate effect of a revision of the estimate of the deferred tax assets and liabilities of 14.1%. The fiscal 2007 rate was impacted by the favorable resolution of certain prior year contingent liabilities.

MANAGEMENT DISCUSSION FOR LATEST QUARTER


CONF CALL

Caitlin DeYoung
Good afternoon and welcome to AmeriCredit’s first quarter 2009 earnings conference call. With me today for the prepared remarks are Dan Berce, President and CEO, and Chris Choate, Chief Financial Officer. Also joining us are Clifton Morris, Chairman of the Board, and Steven Bowman, Chief Credit and Risk Officer.
Before we proceed I must remind everyone that the topics we will discuss during today’s call will include forward-looking statements that involve risks and uncertainties detailed in the company’s filings and reports with the Securities and Exchange Commission, including the annual report on Form 10-K for the year ended June 30, 2008. Forward-looking statements are based on the beliefs of the company’s management, as well as assumptions made by and information currently available to the Company’s management. Actual results and events may differ materially. We will be posting a transcript of the prepared remarks to our Web site shortly after we conclude today’s call.
I will now turn the call over to Dan Berce.
Daniel E. Berce
For our first quarter of fiscal 2009, we earned $412,000 on a pre-tax basis and reported a $1.7 million net loss. These results include a significant boost to our allowance for loan losses to 6.8% of ending receivables from 6.3% last quarter.
In our prepared remarks today, I will go over the results of key portfolio credit performance metrics for the September quarter and our outlook for future credit performance and loan origination activities. Chris will then provide you with an update on funding, liquidity, and the capital markets.
Now, starting with credit, increases in credit losses, delinquencies and deferments during the September quarter reflected typical seasonal deterioration exacerbated by the protracted slowdown in the economy.
Credit results were also affected by our plans to carry an elevated level of delinquencies and maximize our use of deferments to provide our customers the financial flexibility to navigate through the next few challenging months and into a seasonally better part of the year. We anticipate that these actions will minimize the ultimate losses in our portfolio.
Our recovery rate on repossessed collateral was 41.6% in the September quarter compared to 43.6% in the June quarter. Over the last several months, the Manheim Used Vehicle Index has been stable with values of large trucks and SUVs firming from their lows earlier in the year and values of compact cars softening slightly over that same timeframe.
As such, we expect recovery rates to remain in the low 40% range, subject to normal seasonal weakness in the December quarter.
As we head into what typically is our weakest quarter for credit performance, we expect to experience higher credit losses as an increasingly deteriorating macroeconomic environment continues to pressure our customer base.
As a reminder, our credit metrics have and will continue to reflect material upward pressure due to the denominator effect of a declining portfolio balance.
During the September quarter, we purchased $579.0 million of new originations, down from $780.0 million last quarter. The decline in originations volume is driven internally by our focus on preserving liquidity in light of the current capital markets environment and externally by a reduction in new and used car demand.
Earlier this year, in an effort to reduce origination volume, we significantly tightened credit guidelines and lifted the minimum required credit scores. While still early, key performance metrics, such as delinquency rates, on the 2008 vintage originations are encouraging.
During the September quarter, we were able to take advantage of the rapidly changing competitive environment to raise rates and the net fees we charge on loans while remaining selective on the quality of loan applicants we approved.
The weighted average coupon on the loans we originated this quarter was 16.6%, almost 100 basis points higher compared to our June originations. For loans we originated in the September quarter, we received net fees of 40 basis points compared to paying net fees of 74 basis points in the June quarter.
Finally, in light of uncertainty surrounding our access to the capital markets and our efforts to conserve liquidity, we have further decreased our origination target to approximately $100.0 million a month.
With many of our competitors scaling back or exiting the subprime auto finance space, even at this low origination run rate, we believe we will be able to maintain our national footprint and preserve our franchise value for when conditions improve.
I will now turn the call over to Chris Choate to discuss our balance sheet and capital and liquidity position.
Chris A. Choate
For the September quarter, we recorded a net loss of $1.7 million, or $0.01 per share.
On a pre-tax basis, we earned $412,000.
The provision for loan losses for the current September quarter was $275.0 million, or 7.5% of average receivables. The allowance for loan losses increased to 6.8% at September 30 from 6.3% at June 30, 2008. The increase in our allowance for loan losses reflects our expectations that the deteriorating economic conditions observed during the September quarter will result in further pressure on our consumer base.
Operating expenses for the quarter were 2.3% of average managed receivables. We expect to maintain an operating expense ratio, excluding restructuring charges, in the mid-2% range for the fiscal year even as our portfolio is forecasted to decline to approximately $11.0 billion by June 30, 2009.
Now turning to funding and the capital markets. The capital markets continue to be highly volatile and challenging for us to access. Nonetheless, we were able to execute our $500.0 million 2008-1 AMCAR securitization in early October. This senior-subordinated securitization had a weighted average coupon of 8.7%, compared with 6% on our last AMCAR securitization in May of this year.
Initial credit enhancement was 24.35% compared to 20.5% initial credit enhancement for our May securitization. We utilized our Deutsche Bank forward purchase agreement to place the triple-A rated securitization notes and pledged our double-A and single-A rated notes to our Wachovia funding facility, which we closed in October.
Subsequent to this 2008-1 transaction, we have $1.6 billion of available capacity on our Deutsche Bank forward purchase agreement to fund additional triple-A rated securitization notes issued by us through April 2009.
At this point, our Wachovia funding facility is fully utilized and cannot be drawn against in the future. While both the funding cost and our required capital investment in the 2008-1 transaction have increased dramatically and we have at best break-even profitability on the loans securitized, this transaction was critical in providing permanent financing for approximately $650.0 million of finance receivables.
The 2008-1 transaction substantially clears out loans we originated in calendar 2007, leaving primarily 2008 vintage loans on our subprime warehouse lines which were underwritten subject to our credit tightening initiatives implemented in late January 2008.
We are currently evaluating investor interest for another securitization prior to this calendar year end. While we anticipate the market appetite for subordinated bonds to remain limited and all-in pricing to be higher than the 2008-1 transaction we just completed, we expect credit enhancement levels to remain relatively stable.
As of the end of the quarter, we had $3.0 billion of warehouse credit facilities to support our subprime originations. At October 23, we have available borrowing capacity on these lines to fund $1.5 billion of subprime originations. These facilities are not scheduled to mature until October 2009.
We anticipate that the renewal process for these facilities may be challenging and our warehouse capacity may be reduced and the borrowing terms will not be as favorable as currently exist given the economic and capital markets conditions.
Additionally, we are in compliance with all warehouse covenants as of September 30. We are closely monitoring two covenants. One covenant requires that we maintain a portfolio net loss ratio of less than 8.5% of average receivables on a rolling six-month basis.
The other is an aging limitation in our $2.25 billion Master Warehouse Facility that requires us to buyback receivables that have been pledged to the line for more than 364 days. If we are unable to securitize additional receivables by May 2009, we may not have sufficient liquidity to repurchase these aged receivables from the warehouse facilities.
While we do not forecast breaching either of these covenants, if we were to breach them, our lenders could declare an event of default on our warehouse lines and, potentially, remove us as servicer of the portfolio. A declaration of an event of default in our warehouse lines would result in an automatic event of default in certain securitization transactions as well as our unsecured debt.
We are also monitoring a covenant in our Deutsche Bank forward purchase commitment that requires us to maintain a portfolio net loss ratio of less than 8% of average receivables on a rolling six-month basis. If we were to breach this covenant, we would be unable to utilize the remaining capacity in our Deutsche commitment.
Now, turning to liquidity, at September 30, we had $244.0 million of unrestricted cash, down from $433.0 million at June 30, 2008. And we have approximately $150.0 million of additional liquidity from borrowing capacity on unpledged eligible receivables at September 30.
At September 30, we had $112.0 million invested in The Reserve Primary Money Market Fund. Like other investors in the fund, we have not been able to access our money and have written this investment down to 97% of our principal investment.
The write-down of approximately $3.0 million was included in other income for the quarter. We have reclassified this investment from unrestricted cash to other assets at September 30.
We will continue to follow the events surrounding the liquidation of this fund and the return of our investment. It is our understanding that the investments in this fund are rapidly converting to cash and that we should start receiving a return of our investment in the near-term.
Also, during the quarter we retired $115.0 million of convertible notes that are puttable to us next month.
Looking ahead, we expect to maintain more than $200.0 million of liquidity, which should be sufficient to support our lower origination run rate. This forecast incorporates the following expectations:
First, we will retire the remaining $85.0 million of 1.75% convertible notes that we tendered for a week ago.
Second, our subprime warehouse lines may require approximately $100.0 million in additional credit enhancement by calendar year end. While the advance rates on our subprime warehouse lines are fixed at the inception of the agreement, they are dynamic with respect to credit performance. As portfolio credit performance deteriorates, we expect our credit enhancement requirements to increase.
Third, completion of securitization transactions is a net cash outflow at inception. The initial credit enhancement requirements on our securitization transactions are less advantageous than the advance rates on our subprime warehouse facilities. As such, our 2008-1 securitization transaction resulted in net cash usage.
Fourth, our forecast indicates that we will remain close to performance trigger levels on three of our securitization trusts for several more months and we may continue to trap cash to build to higher credit enhancement levels. One of these trusts, the 2007-D-F securitization breached its default trigger during the September quarter. And,
Fifth, we anticipate receiving distributions from The Reserve Primary Money Market Fund over the next several months.
Lastly, a few statistics, shareholders’ equity at quarter-end totaled $1.917 billion, book value was $16.49 per share at September 30. Managed assets to equity decreased to 7.3x at September 30, 2008, compared to 7.9x at June 30, 2008.
I will now turn the call over to Dan for some closing remarks.
Daniel E. Berce
As we enter what is typically our seasonally weakest quarter in terms of credit performance, we are mindful that this year’s seasonal influences will be more dramatic than in the past. Consumer confidence is at all time lows, unemployment is steadily increasing and the capital markets have remained stubbornly restricted.
Operating in this environment over the past year we have seen, and expect to continue to see, pressure on our portfolio credit performance and our liquidity position. We are proactively managing our liquidity position by continuously realigning our originations target to changes in the capital markets.
And we have rationalized, and will continue to rationalize, our infrastructure and operating expenses to our reduced originations target.
On the credit front, we are diligently managing our portfolio performance by increasing staffing and hours worked and optimizing the use of all the collection tools at our disposal.
While we expect to face challenging economic headwinds throughout 2009, we remain confident that our business model is viable and that it addresses a fundamental need of middle-market consumers. And, once the economy improves and access to the capital markets open back up, AmeriCredit is well positioned to take advantage of a much-improved competitive environment.
Until that time, we are committed to taking additional steps as necessary to protect and preserve the value of our franchise.
I will now turn the call back over to Caitlin.
Caitlin DeYoung
As a reminder to everyone, we will be posting a transcript of the prepared remarks on our Web site shortly after the call. Operator, this concludes our prepared remarks, and we are ready to open the call for questions.

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