(Bloomberg) — America’s Car-Mart Inc. and its lenders are working toward a sale that will allow the business to continue operating, according to people familiar with the matter, as the used-car dealer and subprime lender navigates tight liquidity and mounting debt pressures.
Discussions center around a deal that would be executed through a court-supervised Chapter 11 sale process or via a shareholder vote, said the people, who asked not to be identified discussing a private matter. Talks are ongoing, and no decision has been made, they added.
The company has been exploring multiple options, including raising rescue financing and selling some separate assets, after a liquidity crunch put it on the verge of default. As part of the restructuring, the outstanding asset-backed securitization trusts are expected to remain untouched, some of the people said.
The trusts are quoted at around 98 cents on the dollar, according to data compiled by Bloomberg. That implies the loans are over-collateralized, meaning that asset value exceeds the principal amount of the loan.
In June, America’s Car-Mart defaulted on a $300 million term loan from Silver Point Capital to repay its asset-backed line of credit. It has been operating under short-dated forbearance extensions as it looks to finalize a restructuring plan. The company received another weeklong reprieve from lenders through Oct. 22, according to a regulatory filing on Thursday.
Messages left with America’s Car-Mart were not returned, while representatives with adviser Houlihan Lokey Inc. and Silver Point declined to comment.
The company’s stock, which traded at $1.10 Tuesday afternoon, is hovering near its lowest levels since going public in 1992. A market darling of the Covid era, America’s Car-Mart shares reached a peak of around $175 in 2021.
America’s Car-Mart is one of the best known in the “buy here, pay here” segment of auto finance, where companies operate their own dealerships and provide financing to customers in house. The sector caters to “deep” subprime borrowers who often can’t obtain financing elsewhere. Lenders in the subprime auto finance market have faced tough market conditions as high inflation and interest rates make it difficult for lower-credit customers to repay their debts.
“Buy here, pay here” has also experienced a series of blow-ups in recent years. In 2023, two lenders abruptly shut down, and more recently, Tricolor Holdings filed for liquidation last year after an alleged massive fraud came to light.
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