Originally Posted by
Snoopy
You are recalling the old 'Turners Auctions' (TUA) days Bull. And back then, they didn't have the debt levels they have now - you are quite right.
However the current 'Turners Automotive Group' is more 'Dorchester' than 'Turners Auctions'. They are a finance company with an integrated automotive sales arm. And for that business model a higher level of debt is not unexpected. Nor is it a problem. If you look at 'Chapter 8' (post 21) in the 'Investment Story' thread you will see that for repayment purposes the debt level is very similar to Heartland. But the cashflow is much better, because they have fewer reverse mortgages on the books in comparison to HGH.
The act of taking 'corporate debt' and repackaging it as 'securitized debt' will reduce the interest rate paid by Turners by a whole percentage point. With interest rates so low, this is akin to a 20% reduction in Turner's interest payments. At some point Turners will probably flick off the debt collection business. That should shore up the balance sheet significantly. I don't think the debt at Turners is the critical issue that some think.
SNOOPY