As Tricolor Holdings Files For Chapter 7 Bankruptcy, Subprime Auto Market Investors May Have Reason To Worry. Contact Our Investor Lawyers Today To Explore Your Legal Options
With the abrupt demise of Texas subprime auto lender Tricolor Holdings, investors and its lenders are expressing concerns about how this might affect the high-risk debt market. Tricolor filed for Chapter 7 bankruptcy and intends to liquidate following reports of an alleged fraud. Federal prosecutors are investigating.
From small town dealerships to big Wall Street firms like BlackRock to JPMorgan Chase, worries are reverberating as to how this could impact the multi-billion dollar market for bundled auto loans.
Not only that, but with many low-income borrowers having a hard time making car payments, asset-backed securities(ABS), which are the bonds behind these loans, are starting to cause anxiety for the many investors who invested in the subprime auto market and wanted to avail themselves of the interest rates offered by these debt products.
Shepherd Smith Edwards and Kantas Investor Lawyers (investorlawyers.com) represent asset-backed securities investors, including individual investors and institutional investors, in recouping losses caused by investment fraud. With over a combined 100 years of experience in the securities industry, we have the skills and experience necessary to pursue these types of complex claims.
Why Tricolor Holdings’ Demise Could Be Problematic
According to Bloomberg, Tricolor’s business was concentrated on low-income Hispanics in Nevada, Texas, and California, with many of its borrowers undocumented. Kroll Bond Rating Agency estimates that by last year, Tricolor’s lending had reached around $1B.
The subprime auto lender used temporary credit lines (called warehouse facilities) to finance auto loans before bundling them into ABS that were sold to bond investors. The alleged fraud is believed to have occurred among the warehouse facilities.
Trace Pricing reports that following Tricolor’s bankruptcy filing, $119M of its top-ranked ABS that the subprime lender sold in June dropped down to around 78 cents on the dollar. Lower-ranked tranches fell to 12 cents.
Now, those who lent hundreds of millions of dollars to Tricolor are trying to determine how much damage they might have suffered. Numerous banks are included in the list of over 25,000 affected parties in Tricolor’s bankruptcy filing.
There are also asset managers, such as Janus Henderson and AllianceBernstein, and others that own Tricolor ABS. According to Bloomberg, Barclays, JPMorgan, and Fifth Third Bancorp may be looking at up to $200M in impairment charges.
Representing Investors Who Suffered Losses Involving Asset-Backed Securities
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