Bank of America Corp. tossed a lifeline to Mercury Finance Co. Monday, granting a short-term, $50 million loan to the struggling subprime automobile lender.
The loan, secured by Mercury's assets, will enable the Lake Forest, Ill., company to continue operating while a long-term credit is being assembled, William A. Brandt Jr., president and chief executive officer, said in a prepared statement.
The move keeps Mercury out of bankruptcy court, at least for now. Speculation that the company would file for bankruptcy has been rampant since late last month, when Mercury disclosed that it had overstated its earnings for the past four years. The company subsequently missed several payments on commercial paper it issued.
The loan was extended by BankAmerica Business Credit, a unit of the San Francisco-based banking company that provides asset-based financing to businesses in the United States and Canada. Mercury said it will use the proceeds to meet day-to-day expenses and to cover interest payments that are coming due in the next few weeks.
The loan is a sign that "senior creditors have been able to roll up their sleeves and find value enough in the franchise to lend money" to Mercury, said Michael Durante, an analyst with Prudential Securities. "Mercury may be able to make a go of it as an independent company."
Also on Monday, Jayhawk Acceptance Corp. filed for Chapter 11 bankruptcy protection, as expected. The Dallas-based lender also named Carl Wescott as chairman and chief executive, replacing Michael Smartt.
-From staff and wire reports