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Asset Acceptance Tries to Alter Loans
Friday February 22, 10:44 am ET
Asset Acceptance has two credit lines totaling $250 million, with about $175 million of that limit currently borrowed. The loan agreement establishing these credit lines prohibited Asset Acceptance's liabilities from outweighing its net worth by more than 2.5 to 1.
The company has breached that limit, with liabilities outpacing net worth by 2.65 to 1 at the end of 2007.
JP Morgan Chase, the agent bank for the lenders under the facilities, waived that limit until March 17, allowing the company a ratio of 3 to 1.
Asset Acceptance is trying to change the terms of the credit facilities to delay that limit on liabilities to net worth by one year. The company believes enough lenders will agree to the change.
If a company is in default on its debt, lenders can usually demand the company repay its debt immediately or put up collateral.
Asset Acceptance said Friday it borrowed $29 million under the credit line to buy more bad debt because the climate for the company is favorable. Asset Acceptance believes it earned more than $20 million last year.
Shares of Asset Acceptance slipped 37 cents, or 3.6 percent, to $10.05 in morning trading.
