First Acceptance Corp shares fell more than 30 percent on Friday after the automobile insurance provider posted a quarterly loss and had its access to capital reduced as it failed to comply with terms of a credit agreement.
The company said that as of June 30 it didn't meet credit agreement covenants governing its fixed costs and the amount of premium income it uses to pay claims and expenses.
According to a regulatory filing, the credit agreement consists of a $25 million term loan and a $5 million revolving facility, both maturing on June 30, 2010.
First Acceptance said a September 13 amendment has less restrictive financial covenants but increases its interest rate by 0.75 of a percentage point and requires a $6 million principal prepayment by year end. It also said the revolving facility was permanently cut to $2 million from $5 million.
Separately, Nashville, Tennessee-based First Acceptance posted a loss of $23.9 million, or 50 cents per share, for its fiscal fourth quarter ended June 30. That compared with a profit of $14.7 million, or 30 cents, a year earlier.
The company said the loss resulted from higher claims payouts and an increase in income taxes. Revenue rose 23 percent to $92.2 million.
First Acceptance provides nonstandard private passenger auto insurance. It operated 462 retail offices in 12 U.S. states as of June 30 and its insurance units are licensed in 25 states.
The company's shares fell $2.41, or 31.1 percent, to $5.34 in morning trading on the New York Stock Exchange, after earlier falling to $5.20. They began the year at $10.72.
(Reporting by Jonathan Stempel)