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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20459
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) October 27, 1998
CREDIT DEPOT CORPORATION
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 0-19420 58-1909265
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(State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification No.)
incorporation or organization)
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700 Wachovia Center
Gainesville, Georgia
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(Address of principal executive offices)
30501
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(Zip code)
(770) 531-9927
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
During the final week of October, 1998, Credit Depot Corporation (the
"Company") sold loans at a net gain on sale margin that was significantly less
than the net gain on sale margin previously realized. The net gain on sale
margin (the "Net Gain") is the difference between the loan premium paid to the
Company by certain large loan purchasers (the "Gross Premium"), and the yield
spread premium the Company pays to mortgage brokers for acquiring certain loans
("YSP"). While loans sold during the last week of October included a YSP that
was, on average, consistent with previous months, the Gross Premium received by
the Company was significantly less than such average. This significant decrease
in Gross Premium is consistent with a recent industry-wide decline in the demand
for non-conventional mortgage loans, which has led to lower prices being offered
by those entities who are still purchasing such loans. Management believes
substantially all non-conventional mortgage lenders are affected by this market
condition, and that this problem is not confined to the Company.
The Company has taken measures designed to mitigate this reduction in Net
Margin, including reducing and/or eliminating the amount of YSP the Company is
paying. Management believes that such measures are also being implemented by the
Company's competitors, and therefore Management does not believe that these
actions will put the Company at a competitive disadvantage. These actions are
expected to improve the Net Margin currently realized by the Company, although
it is doubtful that the Net Margin will be completely restored to percentages
obtained earlier this year in the near term. The Company is dependent upon the
cash premium received upon sale of its loans to fund its operations, and will
not be able to generate positive cash flow without increased Net Margins and/or
increased loan sales from current levels. Management believes the Net Margin
will improve as loans with a higher average YSP are sold and replaced with loans
with a lower average YSP.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CREDIT DEPOT CORPORATION
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(Registrant)
Date: October 29, 1998 /s/ Ralph J. DeBee
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Ralph J. DeBee
(President and Chief
Executive Officer)
Date: October 29, 1998 /s/ Charles D. Farrahar
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Charles D. Farrahar
(Vice President and
Chief Financial Officer)
