Irvine-based Consumer Portfolio Services Inc. has done a $131 million sale of auto loans to investors, its fourth securitization in the past year after hitting bottom in 1998. 

In all, Consumer Portfolio has done four securitizations worth $345 million since last September. Consumer acquires loans made to auto buyers with less than perfect credit and then bundles them for sale to institutional investors as securities. 

The company was a near-casualty of the subprime shakeout a few years back. In 1998, Consumer saw its securitization business grind to a halt on concerns about the quality of its loans. Consumer had too many bad loans, even for a company that deals in high-risk lending. 

For a while, Consumer survived by making or acquiring loans from dealers and turning them over to other financiers, such as Ford Motor Co. and GE Capital Corp., for a fee. 

A $16 million investment in 2000 by Levine Leichtman Capital Partners LP of Beverly Hills helped Consumer survive. Levine owns about a quarter of the company.

“Back then, we did not have the cash flows to do securitization and the industry was in turmoil,” said Chief Executive Charles Bradley. “As the company got financially more stable, we were able to enter the securitization market.”

Consumer has come a long way since its dark days. In March, the company bought MFN Financial Corp., another subprime lender based in Lake Forest, Ill.

“It has done wonders to increase our leverage,” Bradley said of the MFN buy. 

Since acquiring MFN, Consumer has securitized $270 million in three deals. Bradley said he sees Consumer’s balance sheet strengthening in coming months with more securitizations. As of June 30, Consumer counted $42 million in cash, up from $14 million at the end of 2001. 

But concerns about potentially bad loans still loom for Consumer. The company’s stock has traded at around 2 for more than two years, despite signs of a comeback. Back in late 1997, the company’s shares traded at around 18. 

Even so, Bradley contends the worse is behind the company. Consumer has been getting better interest rates for each of its securitizations, he said. 

The company’s recent loan sale late last month was a private placement with two classes. One set of investors are set to get a 2% yield on their investment in the repackaged loans. Those investors bought $50 million worth. The other set of investors are set to get 3.5% on their $80 million investment. 

The New York office of Germany’s Westdeutsche Landesbank Girozentrale was the lead investment banker on the deal. XL Capital Assurance Inc. of New York insured the notes. Moody’s Investors Service gave the first class of notes a prime I rating, while the others were pegged at Aaa.

“Each securitization deal we have got better pricing,” Bradley said. “Plus, we are posting fewer reserves, which means we can grow more without raising additional equity capital.”

A few years back, Consumer had to keep spread accounts related to its securitizations at higher levels, draining cash. 

In the recently concluded second quarter, Consumer earned about $700,000 in profits, almost three times that of a year earlier. Revenue grew 67% to $27 million. 

With better cash flow, Consumer has been expanding operations. It now has offices in 46 states, up from a low of 29 states a couple of years back. Most of its hiring these days is at its branch offices rather than the Irvine headquarters, Bradley said. 

Even so, Bradley contends the worse is behind the company. Consumer has been getting better interest rates for each of its securitizations, he said. 

The company’s recent loan sale late last month was a private placement with two classes. One set of investors are set to get a 2% yield on their investment in the repackaged loans. Those investors bought $50 million worth. The other set of investors are set to get 3.5% on their $80 million investment. 

The New York office of Germany’s Westdeutsche Landesbank Girozentrale was the lead investment banker on the deal. XL Capital Assurance Inc. of New York insured the notes. Moody’s Investors Service gave the first class of notes a prime I rating, while the others were pegged at Aaa.

“Each securitization deal we have got better pricing,” Bradley said. “Plus, we are posting fewer reserves, which means we can grow more without raising additional equity capital.”

A few years back, Consumer had to keep spread accounts related to its securitizations at higher levels, draining cash. 

In the recently concluded second quarter, Consumer earned about $700,000 in profits, almost three times that of a year earlier. Revenue grew 67% to $27 million. 

With better cash flow, Consumer has been expanding operations. It now has offices in 46 states, up from a low of 29 states a couple of years back. Most of its hiring these days is at its branch offices rather than the Irvine headquarters, Bradley said.