The Tricolor bankruptcy is getting more interesting, with reports indicating ~40% of the subprime auto lender’s active loans had collateral backing up another loan.

The news doesn’t help the sentiment around goeasy (GSY), which has grown its subprime auto lending considerably in recent years…

… resulting in meaningful changes to the composition of its loan book, a key point of contention in the recent short report that’s given shares a ~20% haircut.

Importantly, GSY’s auto loans are kept on the books, not securitized and sold like Tricolor’s. But they’re a key part of its funding model, backing a credit facility that lowers its cost of capital and improves returns…

… a strategy that would be challenged if any changes to the risk profile of this part of the portfolio were to materialize.

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