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3/21/2012 11:35:00 AM
Evansville's Springleaf Finance fighting for its life

Susan Orr, Evansville Courier & Press

—Evansville-based Springleaf Finance Corp., which recently has laid off employees and closed branch offices, shared more information about its financial condition when it filed its annual financial report with the Securities and Exchange Commission this week.

The report shows a company facing major financial challenges. In the report, Springleaf tells of its efforts to improve its footing — but it also acknowledges these measures might not succeed.

Springleaf is a financial services company incorporated in 1927. Its name has changed several times over the years, and the company recently was known as American General Finance before changing its name to Springleaf last year.

Springleaf spokesman Barry Roberts declined to make someone available for an interview. Roberts directed a reporter to the company's 10-K filing, a public document filed with the Securities and Exchange Commission. Information in this story comes from that document.

Springleaf suffered a net operating loss of $225 million last year, and it is operating under a heavy debt load.

In its report, the company said it has $2.8 billion in debt principal and interest payments due this year, with $778 million more due in the first quarter of 2013.

The company said its cash and cash equivalent holdings decreased by $904 million last year, mostly because of debt repayments. As of Dec. 31, Springleaf had $478 million in cash and cash equivalents.

Since January, Springleaf already has taken several steps to return to profitability.

The company has closed about 210 branch offices in multiple states, including Indiana, Kentucky and Illinois. It also reduced its Evansville work force, and between the branch closures and the Evansville layoffs, the company shed 690 employees. The Evansville headquarters alone lost 130 jobs.

Springleaf also stopped making new real estate loans Jan. 1, choosing instead to focus on other types of consumer loans and its insurance operations.

On Jan. 10, Springleaf issued one share of common stock to its parent holding company, Springleaf Finance Inc., for $10.5 million. The money from this transaction went toward debt payment.

On Feb. 10, the company received $273 million (before taxes and selling expenses) from selling its interest in securitization transactions.

On March 2, the company sold about 13,100 non-real estate and retail sales finance receivable accounts in Delaware, New Jersey and Maryland. The accounts, which had a carrying value of $45 million, were sold at a $400,000 loss.

More actions are in the works.

To meet its debt obligations, the company said it is considering numerous options, including "further operational changes to increase or preserve our available cash; additional debt financing, particularly new securitizations involving real estate and/or non-real estate loans; debt refinancing transactions, or a combination of the foregoing; and we may in the future consider portfolio sales."

" ... We believe that we will have adequate liquidity to finance and operate our business and repay our obligations as they become due during 2012, provided we are able to execute on capital raising or debt refinancing plans," the company said.

But these efforts might not succeed, Springleaf noted.

All of the company's credit ratings are noninvestment grade, which makes it more difficult and expensive for Springleaf to borrow money. Ratings agency Fitch downgraded Springleaf's ratings in September, and Standard & Poor's downgraded the company last month.

If unable to secure third-party financing, Springleaf said, " ... our liquidity could be substantially and materially affected, and as a result, substantial doubt could exist about our ability to continue as a going concern."

The company's annual report also included the news Senior Vice President Raymond S. Brown, 63, announced his intent to resign as an officer of the company March 31.

Springleaf's majority owner is New York City-based Fortress Investment Group, which bought an 80 percent interest in the company from insurance giant AIG in 2010. AIG retains a 20 percent interest in Springleaf.

Related Stories:
• Evansville-based Springleaf Finance closing 150 offices in 25 states

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Editor, John C. DePrez Jr.; Executive Editor, Carol Rogers; Publishers: IBRC and IAR


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