Reliance’s Risky Auto Loans Cause A Financial Wreck

Reliance Acceptance Group Inc. said it would report a fourth-quarter loss because of problem loans, the latest auto-loan company to run into financial trouble.

Reliance, like other lenders to car buyers with troubled credit histories, will set aside a “significant provision” for lending losses when it reports earnings about Feb. 21, resulting in a loss for the quarter.

Even so, the San Antonio-based company said it will report a profit for all of 1996 and has a cushion of $100 million in capital because of the recently completed spin-off of its Cole Taylor Bank unit.

“We are confident in our existing systems and controls,” said Chairman Howard Silverman.

The so-called subprime auto loan industry has been in crisis since late last month, when Lake Forest, Illinois-based Mercury Finance Co. revealed it had over-stated earnings for the last four years. Another competitor, Dallas-based Jayhawk Acceptance Corp., subsequently filed for Chapter 11 bankruptcy protection after its banks pulled their lines of credit.

Reliance, which this week changed its name from Cole Taylor Financial Group Inc., had been expected to report fourth-quarter earnings of 57 cents a share, according to a survey of three analysts by IBES International Inc.

The company’s shares, which are down 45 percent since Jan. 28, rose 81-1/2 cents to $15.56-1/4 Friday. The earnings outlook was issued shortly before the close of trading.

Some of the stocks that moved substantially Friday:

NYSE

UNC Inc., up $2.50 to $13.32-1/2 and Greenwich Air Services Inc., up $1.12-1/2 to $22.75.

Greenwich, a Miami-based aircraft repair services company, signed a deal to buy UNC, a similar company based in Annapolis, Md., for $14 per share.

Alza Corp., down 87-1/2 cents to $29.87-1/2 and Alkermese Inc., up $4.25 to $27 on the Nasdaq.

Alza, a Palo Alto, Calif.-based developer of new drug-delivery technologies, is buying 2 million shares of Alkermes, a Cambridge, Mass.-based competitor. Alza will hold a 9.7 percent stake. The companies will collaborate on developing Alkermese technologies.

United HealthCare, up $3.75 to $54.32-1/2.

The Minneapolis-based HMO rose strongly for a second day after Alex. Brown & Sons upped its rating to strong buy from buy. Although fourth-quarter earnings were lower, the company said it is getting larger price increases than analysts had expected. Oxford Health Plans Inc., another successful HMO company, gained $2.12-1/2 to $61.50.

Digital Equipment Co., down $1.37-1/2 to $34.12-1/2.

The Maynard, Mass.-based computer maker said it would cut prices 19 percent on its Pentium, Venturis and Celebris PC lines.

Public Service of New Mexico, down $1.62-1/2 to $18.75.

The state Public Utility Commission ordered the Albuquerque-based utility to lower its natural gas rates by nearly $7 million.

NASDAQ

SpeedFam International, up $3.62-1/2 to $36.82-1/2.

The Chandler, Ariz.-based maker of industrial machines used in the manufacturing of semiconductors went public Thursday, selling 3 million common shares at $32.87-1/2.

ADC Telecommunications Inc. down $1.06-1/4 to $33.93-3/4.

The telecommunications equipment company said it will take a $23 million charge, 11 cents per share, against earnings to write off recently acquired research and development and for consolidation of its West Coast operations.

Imagyn Medical Inc. down $1.62-1/2 to $8.12-1/2.

The Laguna Niguel, Calif.-based technology company said it expects a wider first-quarter loss from operations and total sales below year-ago levels.