Subprime car loan firm files for bankruptcy
Plantation company blames Hurricane Irma for delinquencies
Summit Financial Corp. of Plantation, which has written subprime car loans for consumers since 1984, has filed for Chapter 11 bankruptcy protection, citing rising borrower delinquencies due to Hurricane Irma.
The privately-held, family-owned company has $150 million in loans outstanding and employs 50 people.
In a statement, Summit attorney Doug Jeffrey said the company intends to continue operating as it restructures its finances.
He said Summit elected to enter Chapter 11 after it “performed an extensive analysis of alternatives.” The option, he said, “is the best strategy to ensure its long-term success.
“We intend to continue working constructively with our vendors and lenders while meeting our going forward obligations,” he said.
Summit provides financing through the purchase and servicing of retail sales contracts that originate at franchised auto dealerships and independent used car dealerships in Florida, the company said in its court filing.
“This Chapter 11 filing was precipitated by a large number of defaults of retail installment sales contracts caused by Hurricane Irma, which resulted in the Debtor defaulting on its obligations to its secured lender (s),” according to court papers filed on Friday in U.S. Bankruptcy Court in Fort Lauderdale.
“The Debtor’s cash flow was impacted by Hurricane Irma that made landfall in Florida on September 10, 2017,” the bankruptcy petition said.
The company said it was one of 258,684 Broward County businesses affected by the storm, which closed major roadways, created lengthy power outages and prevented many customers
“from working and ultimately making their car payments to the Debtor. These challenges resulted in a domino effect by causing a delay in the receipt of revenue.”
In the petition, Summit said its largest secured creditors are Bank of America, which is owed $77 million, and BMO Harris Bank, which is owed $33 million.
The company also said it has 100 to 200 unsecured creditors, 19 of whom lent between $300,000 and $1.7 million to the company.
On its website, Summit says it has partnered since 1984 with auto dealers in Florida, Georgia and Alabama “to provide an easy, fast, and convenient source of financing, to increase their business growth.”
In November, the Federal Reserve Bank of New York reported increases in the delinquency rates of several consumer debt types, particularly subprime auto loans.
“Examining the auto loan market more closely revealed notable differences between auto finance and auto bank lenders,” said Wilbert van der Klaauw, senior vice president at the New York Fed. “Delinquency rates among auto finance lenders are considerably higher and rising, especially for subprime borrowers, in part reflecting differences in underwriting standards.”