Credit Quality Flags Fly at AmeriCredit

AmeriCredit(ACF Quote), the rapidly growing consumer lender, appears to be extending loans to avoid setting off credit-quality triggers that could end up depriving it of much-needed cash.

The Fort Worth, Texas-based company, which makes high-interest car loans to people with dubious credit histories, boosted the size of its loan portfolio by a stunning 51% in 2001, reaching $12.4 billion. But the economic slowdown, combined with possibly poor borrower selection, has led to a sharp rise in past-due loans at AmeriCredit. Credit fears have driven the stock 67% below its 52-week high. Tuesday afternoon it was off $1.20 cents, or 5.4%, to $20.81.

Now the deterioration in credit quality is on the verge of having a serious impact on AmeriCredit's cash flows. The rising amount of nonpaying loans could trigger actions that end up starving AmeriCredit of the cash it needs to fund more loans. If that happens, AmeriCredit would have to slam the brakes on the growth the market craves. ...