America's Car-Mart facing few options as liquidity pressures mount — report

Shares of America's Car-Mart (CRMT) slid another 5% Tuesday, deepening a year-long collapse as mounting financial pressures fuel concerns over the company's future.

America’s Car-Mart’s (CRMT) decades-old business model to sell high-mileage used cars financed at high-interest rates to borrowers with low credit scores is now undermining its ability to continue operations. Increased interest rates choked off the company’s source of cheap cash while also increasing auto loan delinquencies from cash-strapped consumers.

The company’s reliance on asset-backed securitization of its loans has also become more problematic as the money collected from the underlying loans is required as collateral to its bondholders.

According to Bloomberg, the company is exploring its options, which could include bankruptcy or selling off a majority of its assets.

The downfall has been years in the making but became much more acute in the past three years as the company slipped further into the red. In its most recent quarterly results, America’s Car-Mart (CRMT) lost $4.04 per share on an 18% drop in sales, despite the higher cost of used cars, both of which were worse than expected. During the company’s earnings call, CEO Douglas Campbell acknowledged that “until we have additional financing capacity in place, whether through a warehouse facility, a recapitalization, or another financing transaction, our liquidity and our ability to originate at the volume our customers want and need will remain limited.”

The company confirmed it has retained Houlihan Lokey to serve as financial advisor to explore strategic alternatives that could include bankruptcy, recapitalization, a merger, or obtaining additional financing from investors.