Moody's Investors Service on Tuesday affirmed its Aaa rating for $27 million of securities issued by Jayhawk Acceptance Corp., which filed for bankruptcy protection last week.
The rating agency's action was a dose of good news for investors who have been spooked by troubles at Jayhawk and Mercury Finance Co., two subprime auto lenders that ran into severe financial troubles this month.
Moody's was comfortable with the level of insurance the Jayhawk securities carry as well as the company's willingness to step up policing of loans that back the issues, said Kent G. Becker, the senior analyst who headed the review.
The Dallas company's plan to bolster its collection staff, while not mandated by Moody's, "is a very positive sign" that the lender intends to stand behind its loans, Mr. Becker said.
Calls from nervous investors prompted Moody's to review the Jayhawk issues, Mr. Becker said. "Anytime a company files for Chapter 11, investors want to know what the story is."
Jayhawk filed for bankruptcy protection on Feb. 7, after reporting a $7.9 million fourth quarter loss that prompted its lenders to cut off access to new funds.
In related news, a federal bankruptcy court judge ruled Tuesday that Jayhawk can finance its auto operations for the next 15 days by tapping $2.3 million of collateral that backs a $65 million line of credit.
The judge denied a request for Jayhawk to use another $1.1 million to keep afloat a medical unit that funds elective surgery.