Ritter says the company will concentrate on nonprime customers with credit scores just below the prime-risk category, as opposed to deep subprime. The company declined to assign a range of credit scores to its target customers.
Flagship's predecessor company is Flagship Credit Corp., of Chadds Ford, Pa., west of Philadelphia. It bought loans from about 3,000 dealers in 18 states in the mid-Atlantic and Southeast.
Ritter says that under its new ownership, the new company plans to expand nationwide. Flagship Credit Acceptance's first order of business is to re-enlist the dealers that did business with the old Flagship company.
“While we anticipate being a national lender, our initial focus will be east of the Mississippi and Texas,” Ritter said.
David Schiff, a partner at Perella Weinberg Partners, says the firm plans to invest up to $50 million as “an initial equity and capital commitment.”
Said Schiff: “It will be utilized in conjunction with credit facilities from financial institutions to support the lending capacity necessary for the dealer community.”
Flagship is looking to originate its own loans and acquire existing loans originated by others. “As part of our strategy, we also plan on purchasing seasoned loan portfolios from dealer groups and other financial institutions,” Schiff said.
Ritter is starting his third stint running an auto lender named Flagship, although each time it has been under different owners. The original Flagship was launched in 1988. Ritter left the company in 2000, when Itochu International, the U.S. subsidiary of a large Japanese trading company, sold it to Wells Fargo Financial Services. Wells Fargo retired the Flagship brand name.
Wells Fargo sold the business in 2006 to a private-equity firm. Ritter rejoined the company then and relaunched the Flagship name. His third stint begins under Perella Weinberg, which is buying a majority share of the latest Flagship incarnation. Ritter says management owns the minority share.
Ritter and Schiff said in a phone interview that Flagship expects to succeed where other lenders were forced out of nonprime because big banks had other priorities instead of specializing in the nonprime auto niche.
In addition, credit markets and customer demand have started to come back, even if the comeback is slower than the auto industry would like.