America's Car-Mart Inc., a subprime used car dealer and lender that experienced significant growth during the COVID-19 pandemic, is now facing a severe liquidity crisis and is on the verge of defaulting, necessitating a search for at least $500 million in rescue financing to avoid bankruptcy. The company's stock has plummeted by 68% to $1.67 on June 10, reaching its lowest point since its 1992 IPO, a stark contrast to its peak of around $152 shortly after the pandemic. This downfall highlights the challenging conditions in the subprime auto finance market, where high inflation and interest rates are impacting the ability of lower-credit consumers to repay debts.
Fitch Ratings reports that delinquency rates on subprime car loans are near record highs, hovering around 6%. The company's financial statements for the fourth quarter and fiscal year ended April 30, 2026, include a "going concern" disclosure, indicating substantial doubt about its ability to continue operations within one year due to significant indebtedness and liquidity issues. While total debt decreased to $722.4 million from $776.8 million in the prior year, and total cash, including restricted cash, increased to $131.6 million, the underlying liquidity constraint remains critical. Unrestricted cash, crucial for operations, stood at $47.0 million.
America's Car-Mart has been working with its banker, Houlihan Lokey Inc., to secure the necessary capital, and discussions about a rescue loan are ongoing. The company also amended its credit agreement on June 19, 2026, which provides covenant relief and a window to explore strategic and financing alternatives. However, the company cannot assure that it will secure such financing on acceptable terms, or at all. Management's plans to address these conditions have not been fully implemented, and they do not alleviate the substantial doubt about its ability to continue as a going concern. The company's total revenue for the quarter was $302.8 million, with interest income increasing 3.7% to $253.7 million, but sales volumes declined 14.3% to 48,891 units, reflecting reductions in dealership base and inventory purchases.
