acc ppt final

Proprietary and Confidential

ACC Consumer Finance LLCHigh Yield Auto Loan Investment Opportunity

ACC Consumer Finance LLC 925 “B” Street Ste. 403 San Diego CA 92101

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Presentation Outline

• Executive Summary

• Investment Highlights & Risks

• Business model

• Industry Overview & Trends

• Management

• Conclusion

• Financials

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Executive Summary

• Seeking to raise $1.5 million in equity to fund purchases of high-yield sub-prime vehicle secured installment loans and to fund lean operating expenses.– Business plan involves prudent yet impressive high-yield loan portfolio growth

via leveraging superior management experience and proprietary origination channels; corporate infrastructure and technology systems are tested and ready to expand operations within days of funding

– Recent financial crises caused dramatic increase in number of consumers who no longer have prime credits due to FICO score reclassification, yet demonstrate prime repayment characteristics

– Major market increase in number of sub-prime borrowers with unique credit profiles

– ACC poised to capitalize on sub-prime dynamic

ACC Consumer Finance LLC

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Investment HighlightsProprietary and diverse deal flow arrangements

• Preferred arrangements with our unique CU network and dealer base and with buy-here-pay-here relationships

– Operational capacity ready to deploy raised funds in CA and NC and pending application for license in PA

High-Yield loan portfolio opportunity

• Total return on portfolio >25%; portfolio yield >20%– Unique credit performance for higher-yielding loans– Compelling “Ground-floor”/equity opportunity

Compelling market dynamics

• Economic crisis drives prior prime borrowers to be reclassified as sub-prime, which contributes to large increase in sub-prime borrowers

• Economic crisis continues to cause credit unions and community banks to turn away from sub-prime borrowers and focus exclusively on prime credit borrowers

• Flat and “only necessary” executive team drives lean expense base– No major brick-and-mortar required

Low start-up Costs

• CEO highly respected within industry; successfully involved in launching and selling three sub-prime auto lending companies

• Management has extensive experience in auto lending, processing, financial services and equity capital markets

Reputable and experienced management team

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Investment Risks

Fraud

Straw purchases

Uninsured vehicle

Customer life Changes

• False information provided by dealer or customer– We have a method for discovering this during customer

interview

• Higher-risk customer will have joint applicant who is not the intended driver placed on loan

– We have a method for discovering this during customer interview

• In the event of an accident, uninsured borrower may fail to repay defaulted balance because borrower is paying for replacement vehicle and not damaged vehicle

– We track insurance daily and contact borrower one week prior to when insurance is set to expire – we are identified as loss payee on policy and are always notified in event of cancellation at which time we call customer

• Unforeseen changes in customer’s lives, which impacts ability to pay

– Difficult to mitigate yet we develop good rapport with customer as our approach to collections is not confrontational while not easy/lenient

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BUSINESS MODEL

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Business Plan

• Business plan involves prudent yet impressive high-yield loan portfolio growth via leveraging superior management experience and proprietary origination channels; corporate infrastructure and technology systems are tested and ready to expand operations within days of funding

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Leading Lending Platform

• All links in auto finance value chain fall under ACC umbrella– All following facets utilize world-class software

developed “in-house” by CEO• Auto installment contract origination

• Loan pool purchases

• Servicing and collections

– Business model leverages channel partners, management capability and industry-leading technology

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Loan portfolio composition/sources

• ACC’s loan portfolio will primarily be sourced from underwriting/originating individual loans = Point of Sale (POS)– Opportunistically, ACC will purchase pools of loans from

dealerships or related finance companies = Buy-Here-Pay-Here (BHPH)

– Opportunistically, ACC will purchase pools of loans from independent auto finance companies

This combination of sources for loan growth makes ACC unique compared to competitors

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Loan portfolio composition/sources (cont’d) - POS

• Point of sale– Credit Unions, banks and finance companies submit

loan applications:• Directly to ACC• Through ISOs

– Dealers submit loan applications to ACC: • Via online portals (Dealer Track, CreditSmarts and CU

Lendgistics)• Directly to ACC• Through independent Sales Organization (ISO)

ACC will have a Right of First Refusal on any non-prime/sub-prime loan application from a base of 200+ credit unions

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Loan portfolio composition/sources (cont’d) -BHPH

• Buy-Here-Pay-Here

– ACC acquires pools of loans at a discount from dealerships and/or a dealership’s related finance company

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Loan portfolio composition (cont’d) – Pools of Loans

• Purchases of pools/blocks of loans

– This category simply describes all other pool/block purchasing channels, other than dealer or dealer-related finance companies

– ACC acquires pools of loans at a discount from credit unions and independent auto finance companies

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Loan Origination & Acquisition Strategy

Auto DealersCredit Unions &

Independent Finance Companies

Dealer Track

Credit Smarts

ISO Network

ACC Consumer Finance

Preferred Preferred Direct Exclusive Direct

Customer Channel

Intermediary Network

Auto Loan Provider

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• Down payment of $1,500 made at car purchase

• Loan size of $15,000 - $17,000 with 60 month payment terms

• 20.95% APR on face; ACC purchases at 100% of face

• Payment of $400/month

• Average FICO score in range of 550-575

• Payment to income ratio (PTI) 12%

• Debt to Income ratio (DTI) 40%

• 24 months in current job and residence

• LTV on underlying car value 140%

• No “kill switch” on a borrower with FICO > 580 (~five years ago, this type of customer was likely a prime borrower)

Loan Profile for POS/ACC Originated Loans

Average loan profile has interest rate of 20%, purchased at 92% of face value; borrower’s credit profile much stronger than purchased pool average

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• Down payment of $1,500 - $2,000 made at car purchase

• Loan size of $12,500 with 42 - 48 month payment terms

• “seasoned”, 3 - 4 months on-time payments made prior to ACC purchase

• 19 - 21% APR on face; ACC purchases at 85 - 70% of face

• Payment of $350/month

• Average FICO score in range of 500 - 550

• Payment to income ratio (PTI) 12 - 18%

• Debt to Income ratio (DTI) 40%

• 24 months in current job and residence

• LTV on underlying car value 100 - 150%

• Cars have GPS location devise and remote “kill switch”

• Anti-tamper technology enables kill switch used in event of late or non-payment, which greatly enhances collection efforts

Loan Profile for BHPH/purchased pools

Average loan profile has interest rate of 19-21%, purchased at 70-85% of face value; overall average yield is 25%

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Point of Sale Loan: Process & Timeline

Day #

Customer, aware of credit, saves down payment. Typically brings $2,000+ Down payment to Independent/Franchise Dealer

Dealer checks customer’s credit, sources loan bids

through Dealer Track

FICO<600

Dealer collects all required info. form customer

Dealer originates loan: Customer completes all financing, disclosure, titling paperwork

Customer leaves dealer lot in car

Welcome kit mailed; collections process begins

Funding Complete

Loan boarded for servicing

GPS installed/validated

Cash remitted to dealer

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2

2

8

8

10

11

9

ACC verifies: employment, contact info., collateral history, interviews customer by phone,

GPS

1

1

Dealer may assist in selecting alternate collateral and may restructure deal for deep sub-prime

Sup-prime lender approves deal

Sends app as sub-prime credit customer to: AmeriCredit, Exeter, Drive, etc.

Dealer/customer proceed down path to finalizing vehicle purchase and financing w/another lender

1

1

YES

Dealer submits loan to deep sub-prime lenders (Westlake, CAC, Pelican,

Auto Finance

Loan documents returned to

dealer

Deep sub-prime lender decision deal

and structure

1

1

1

No

1Dealer chooses lender: pricing, term, service,

convenience, relationship

Pelican chosen

Dealer overnights loan documents to Pelican

Other lender selected

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Servicing Approach• Collection contact activity begins when a payment is no more than

five (5) days past due and continues with a minimum of three (3) attempts per day with collection calls. Payment options for curing the delinquent payment include mailing, electronic check by phone, wiring of cash funds, credit/debit card transaction, and EFT

• Conduct dialing campaigns with live agents calling a minimum of three (3) attempts per day and field contact at the customer’s place of residence or employment or other authorized locations

• Experienced skip tracing staff locate customers and/or the collateral in the event it becomes apparent that the information currently available is not valid and/or accurate state-of-the-art search products are utilized by the department including outside vendor products

Early Stage Collections

Late Stage Collections

Skip Tracing

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Servicing Approach• ACC provides staff for managing repossession, impounds/confiscation

recoveries and preparing vehicle for disposition. Repossession decisions are made only with ACC approval and actual repossessions are performed by ACC in an expedient and efficient manner. Repossession is established before the sixty first (61st) day of delinquency

Loss Mitigation

Customer Service

Support Services

• ACC provides experienced customer service staff to assist customers with inquiries regarding their account. Report are available concerning staffing, call volumes and call quality monitoring

• ACC provides assistance in administrative functions including the reconciliation of data, reporting of all accounts to the three national credit bureaus, and processing of all correspondence to and from the customers. ACC also sends monthly statements to customers with the current account status and the date that the payment is due

Bankruptcy• Customer bankruptcies are isolated from the regular portfolio while the

filing is active

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Proprietary and ConfidentialProprietary and Confidential

Industry Overview & Trends

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Delinquency and Default Profile of Non-Prime/Sub-Prime Borrower has Improved Due to FICO Score Reclassification

• Recent economic crisis has caused many prior prime-borrowers to be reclassified to less-than-prime

• Reclassified borrowers typically still maintain superior payment discipline despite drop in FICO score

• Stronger class of non-prime borrowers positively influence delinquency and defaults rates

• Given slow rate of economic recovery, this non-prime/sub-prime credit cycle is expected to last for several more years

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Positive Industry Activity

• Although consumer demand is still constrained to pre-recession levels, new and used car sales levels are trending positively

– Industry-wide auto sales/transactions in 2012 increased approximately 13.4% to 14.5 million transactions from the prior year and is expected to increase to 15.5 million transactions in 2013

– Current sub-prime auto finance market is approximately 60% of peak 2006-2007 levels

Source: TransUnion report dated 2/23/13

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Automotive Finance Lenders Share Gains

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Recent Automotive Delinquency: 30 Day DelinquencyYear/Year Change

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Recent Automotive Delinquency: 60 Day DelinquencyYear/Year Change

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Proprietary and ConfidentialProprietary and Confidential

Management Profiles

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Executive Management TeamEXPERIENCED

HISTORY TOGETHER

PREVIOUS SUCCESSES

COMPLIMENTARY SKILLS

Senior team has 70+ combined years relevant experience

Two senior managers worked together at ACC for ~ 13 years

($11.5 billion portfolio)

- CEO instrumental in three successful start-up finance Cos

- COO top performer

Auto lending and equity capital markets combine to

support future growth avenues

CEO

COO

CFO

Frank Mercer • 35+ years experience in Auto Finance• Superior industry wide reputation• At first ACC, managed > 630 employees• Materially involved in three successful auto lending start-up

companies

Dave Colletti• 18+ years experience in Auto Finance• Consistently ranked top producing Account Rep• Worked closely with Mercer for > six years• B.S. (Temple University); Risk Management and Marketing

Chris Stulpin• 15+ years experience in Financial Services industry• 9 years as financial institutions/bank equity analyst• Extensive experience in raising capital • Bachelors of Business Administration (The Wharton School of

the University of Pennsylvania); Accounting and Finance

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Conclusion

Entering the industry with our solutions at this point is the best possibletime, for the following reasons:

Multifaceted management team lead by industry icono Greater than 70 years of auto and finance related industry experience

High-Yield Loan Portfolio Opportunityo Impressive returns

Marketplaceo FICO reclassifications drive opportunity

Credit Union Market Focuso ACC’s primary and unique target market

Business Model and Strategy Exploits the Asymmetric Supply/Demand Dynamico Implementing a model that identifies, fills and optimizes every link in the auto finance value

chain

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Financials

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ACC Consumer Finance, LLCPro Forma 1QFY1 2QFY1 3QFY1 4QFY1 FY1 1QFY2 2QFY2 3QFY2 4QFY2 FY2 FY3

Contracts

Cost of Contracts Purchased 1,587,000 2,691,000 3,450,000 4,015,800 11,743,800 4,308,243 4,438,787 4,573,287 4,711,862 18,032,178 20,785,256

Total Contracts Receivable 1,709,844 4,186,290 7,549,236 11,469,104 11,469,104 15,637,075 19,786,226 23,908,251 27,994,184 27,994,184 43,879,678

Revenues

Total Revenues 267,263 484,400 767,645 1,048,893 2,568,201 1,316,735 1,555,939 1,794,657 2,032,462 6,699,792 10,464,881

Expenses

Total Expenses 203,244 275,820 355,088 447,552 1,281,704 650,989 768,396 873,472 983,708 3,276,566 4,938,254

Payroll Taxes / Benefits 30,432 31,296 35,004 40,356 137,088 72,079 84,311 94,255 106,195 356,839 523,245

Income

Net Income w/out State/Fed Income Tax 33,587 177,284 377,552 560,985 1,149,408 593,667 703,232 826,929 942,558 3,066,387 5,003,383

Net Income w ith State/Fed Income Tax (rate of 35%) 21,831 115,235 245,409 364,640 747,115 385,884 457,101 537,504 612,663 1,993,152 3,252,199

Accumulated Income 33,587 210,871 588,423 1,149,408 1,149,408 1,743,075 2,446,308 3,273,237 4,215,795 4,215,795 9,219,178

Accumulated Income 21,831 137,066 382,475 747,115 747,115 1,132,999 1,590,100 2,127,604 2,740,267 2,740,267 5,992,466


Exec. Profile – Frank Mercer (CEO)

Frank Mercer is Chief Executive Officer of CU Lending Solutions, which he founded as a limited liability company in November,2006. Recognized as a consumer finance industry innovator and thought leader, Frank’s ability to propel companies to the nextlevel has been a key to his success. Frank has been involved in two other special finance company startups.

Frank is experienced in multiple disciplines, including executive management, sales and marketing, credit and fundingoperations and risk management, which allows for broad senior executive understanding and the ability to become directlyengaged with all aspects of special finance lending. Frank is very organized, focused and effective. He creates a workenvironment of execution quality, speed and intensity and has the natural ability to lead others to higher levels of performancethrough his personal attributes of strong leadership and training skills. His ability to articulate business processes quickly andeffectively in simple terms through content-rich, disciplined presentations and discussions has proven to be a driving factorbehind the performance of employees he has managed.

Throughout his career, Frank has been instrumental in building winning companies. His first startup was with American CreditCorporation in 1993. Frank held the position of SVP, Chief Credit Officer. ACC went public in 1995 and was sold to HouseholdInternational in October 1997. Frank’s second startup was founded in 2004, in which he was the founding President and ChiefOperating Officer of ACC Consumer Finance LLC, a leading provider of consumer loan installment contacts and servicing for thecredit union industry. ACC was acquired in February 2007 by CompuCredit Corporation, a marketer of branded credit cards andrelated financial services.

Frank founded CU Lending Solutions in 2006. CU Lending Solutions is a highly-respected lending strategy solutions company inthe credit union industry that assists in developing professionals with the personal dedication, ethics, and capabilities neededto succeed in today’s lending environment.

From 1993 to 2003, Frank served as Group Director of National Sales and was the Chief Credit Officer for Household (HSBC)Auto Finance with $14.5 billion in assets, and was responsible for generating over $450 million per month in auto dealerinstallment contracts. He directed branch network operations, designed and implemented innovative sales programs and wasresponsible for overseeing the activities of 635 employees.

Frank started his career in consumer lending in 1972. Prior to joining Household, he managed the mortgage sales team atOlympian Bancorp, served as Senior Vice President of Consumer Lending at Imperial Savings and was a District Manager overeleven company offices for Mellon Financial Services.

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Exec. Profile – Dave Colletti (COO)

Mr. Colletti is a multi-faceted and highly successful, results-driven, seasoned consumer auto

finance professional with 15 years of leadership experience. David is a visionary leader who

conceptualizes, develops, and brings to market high-yield financial receivables with a high degree

of technology to significantly mitigate risk. David is a sales, leadership, operations, asset recovery,

re-marketing and business development expert. David’s most recent role was as Director for

Accredited Home Lenders, where he managed and directed secondary market activities inclusive

of developing and implementing underwriting guidelines, credit risk management, contract

negotiations, whole loan transactions and securitization modeling. David directed the financing

process from initial project underwriting through final negotiations of terms and settlement. He

conducted extensive analysis of various financing options, including whole loan sales and

securitizations, and provided recommendations for best overall options. David led loan

placement effort into the secondary market. He developed, orchestrated and managed policies

and procedures for the organization, ensuring operational objectives were met. David cultivated

and maintained relationships with capital providers; targeted potential financing sources, such as

hedge funds, international funds; and banking institutions. David also worked with Frank Mercer

at ACC, Household Auto Finance, HSBC, CULending Solutions and E&S Funding. David has been

consistently a top performer throughout his career.

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Exec. Profile – Chris Stulpin (CFO)

Mr. Stulpin brings in-depth knowledge of equity capital markets and asset based lending to ACC.Chris has been involved in the financial industry for the last 15 years where he utilized hisexpertise in finance and accounting.Most recently, he was an institutional bank equity analyst for nine years; his last employer wasRaymond James Financial. As an equity research analyst, Chris applied his financial knowledgebase, and on a daily basis communicated with institutional investors and bank managementteams about a myriad of related topics, including financial and accounting intricacies, pro formafinancial modeling including earnings projections, regulatory requirements for financialcompanies (primarily banks), evolving capital “requirements” loan loss reserve analysis andinvestment securities. During his tenure as an analyst, Chris was involved in raising capital forseveral banks and analyzed capital raises other banks had completed. He was engaged in andanalyzed several mergers and acquisitions of financial institutions. His responsibilities alsoincluded identification of potential financial institution acquirers and targets. Additionally, Chriswas involved in the securitization of bank debt/equity into investment vehicles for accreditedinvestors. As an analyst, Chris has been quoted and referenced in BARRON’S, the Los AngelesTimes and often in trade publications. Prior to his analyst position, he worked in the asset-basedlending field, which exposed him to financial statements of businesses in many unrelatedindustries. Chris received his Bachelors of Business Administration, with a concentration inFinance and Accounting, from the Wharton School of the University of Pennsylvania.

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Disclaimer• These materials are for discussion purposes only and are being disclosed to you on a confidential basis and are

solely for the use of, the recipient. These materials are proprietary to ACC Consumer Finance LLC, Inc. (“ACC”, or the “Company”) and may not be distributed, copied or shared with any party other than with the prior written approval of ACC. These materials have been prepared for the exclusive use of ACC for the purpose of obtaining indications of interest from prospective investors in connection with a possible investment into ACC. It is being disclosed to you on a confidential basis solely for the purpose of enabling you to consider an investment in the Company. It may not be disclosed, reproduced or distributed to any third party, other than your professional advisors, without the express consent of ACC. Interests in the Company will not be registered under the Securities Act of 1933, as amended and the Company will not be registered under the Investment Company Act of 1940, as amended.

• These materials do not constitute an offer to sell or a solicitation of an offer to buy interests in the Company or any securities or any other instruments by anyone in any jurisdiction, nor should it be used by others in connection with any sale, offer for sale or solicitation of an offer to buy securities or any other instruments. Any such offer or solicitation may be made only by the delivery to a prospective investor of a definitive confidential offering memorandum (“Memorandum”) and other offering documents (“Agreement”). An investment in the Company will entail a number of risks and before investing prospective investors should consider the risks described in the Memorandum.

• The description of certain aspects of the Company is a condensed summary only. A number of factors material to a decision whether to invest in the Company have been presented herein in summary or outline form only, in reliance on the financial sophistication of the potential investors. Any information contained herein is preliminary, subject to change and is qualified in its entirety by reference to the Memorandum and Agreement. The information contained herein is subject to updating, completion, modification and amendment. All information is preliminary and subject to change. ACC does not undertake any obligation or responsibility to update or amend any such information.

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Disclaimer (cont’d)• An investment in the Company is speculative, subject to substantial risks, suitable only for experienced and sophisticated

investors and requires the financial ability and willingness to accept the high degree of risk and lack of liquidity inherent aninvestment in the Company, which could include a complete loss of investment. No person should invest in the Company who cannot afford to hold the investment for a substantial period of time or who cannot afford the loss of the entire investment. No assurance can be given that the Company’s investment objective will be achieved. ACC may modify its strategy or the contents of this document without notification. In making an investment decision, investors must rely on their own examination of the Company and the terms of the offering, including the merits and risks involved.

• No representation or guarantee is being made herein as to the future investment performance of the Company. No representation is made that the interests of the Company will actually perform as described in any of the illustrative calculations which may be presented herein or otherwise to any prospective investor. Any information, and in particular any calculations, contained herein or otherwise presented to any prospective investor is not intended to predict actual results, which will differ, and may differ substantially, from those illustrated in the information presented. Further, in evaluating any illustrative performance results contained herein or in any other information provided to a prospective investor, prospectiveinvestors should understand that not all of the hypothetical assumptions used in the model are described herein or therein, and conditions and events that are not accounted for by the model may have a significant effect on the performance of the interest of the Company or the Company’s investments. Prospective investors should consider whether the behavior of these securities should be tested based on different and/or additional assumptions from those included in the information herein.

• Nothing herein should be construed as investment, legal, tax or ERISA advice. Each prospective investor is urged to consult with its independent financial advisor, lawyer or accountant as to legal, tax and related matters to which it may be subject under the laws of the country of residence or domicile concerning the acquisition, holding or disposition of any investment in the Company.

• ACC are not providing investment advice, acting as a fiduciary or endorsing any company, products, or services. The information and data contained here is not intended for trading purposes or for any purpose other than your personal informational use. ACC and its suppliers do not warrant or guarantee the accuracy or timeliness of any such information or data and shall have no liability for investment or other decisions based upon this information. ACC specifically disclaims any and all liability or loss arising out of any action taken in reliance on this information, including but not limited to market value loss on the sale or purchase of securities or other instruments or obligations.

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acc ppt final

Documents

subprime vehicle

prime credits

number of subprime borrowers

prime credit borrowersflat

prior prime borrowers

portfolio yield

unique credit performance

unique credit profilesacc