Four credit unions that specialize in financing taxi medallions filed a lawsuit against Mayor Bill de Blasio, the city's Taxi and Limousine Commission and Attorney General Eric Schneiderman Wednesday, alleging they are letting Uber illegally pick up street-hail passengers.
Melrose Credit Union, Montauk Credit Union, Progressive Credit Union and LOMTO Federal Credit Union are seeking a preliminary injunction ordering the city to enforce the law that prohibits any vehicle other than a yellow taxi from responding to street hails.
According to the complaint (paragraph 47), the secondary market for taxi medallion is all but frozen and auctions have been indefinitely postponed.
Furthermore, the complaint alleges that "borrowers are falling behind on their monthly loan payments, and performing loans will soon fail as they mature with balloon payments that medallion owners cannot afford to pay."
The plaintiffs claim that liquidation of these taxi medallions will drive the value lower and ultimately these medallions could become worthless.
In anticipation of loan losses, these credit unions are building their reserves for loan losses.
For example, Melrose Credit Union has significantly increased its reserves for loan losses from $4.9 million as of March 2014 to almost $28.3 million at the end of the first quarter of 2015.
But are these loan loss reserves sufficient given the plaintiff's view that the taxi medallion industry faces an imminent collapse, if relief is not granted?
Hopefully, the National Credit Union Administration is closely monitoring the situation.
Read the story.
Read the complaint.
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I think you need to add a tag for "Taxi" or "Medallion" to your list. This is likely to be a topic that you will be returning to often during the next year or two. Medallions are a distressed asset class now and will require much higher rates of return (ie lower prices) to attract new capital into what is now a frozen market. It's going to be a bumpy ride for those CUs that are specialized in these loans.
ReplyDeleteIf Lyft and Uber remain on the road, in any form, it represents more supply in what was before a closed market.
ReplyDeleteHow does that possibly bode well for the medallions purchased at peak prices based on an assumption of fares and fare rates?
No matter the remedy placed on uber and Lyft, if any, there is a permanent increase in the supply of drivers. For those medallions purchased at or near peak levels who now face fewer fares and lower fares....OUCH.
ReplyDeleteFor the lender....is there enough capital?
For credit unions who bought participations...hmmm.
For NCUA...?
This credit union is doing a brisk business financing vehicles for our UBER & LYFT membership. These sole proprietor business owners are doing a brisk business and to date we have no delinquency to report. Tell me are these credit unions processing or denying the credit card 'fare' transactions and related transaction income? You can't have it both ways. Did the credit unions holding these Medallions engage in any due diligence? Did they think of UBER & LYFT or instead did they focus on the filthy stinking rich Medallion loan participation income? Capitalism seems to be working quite well for our UBER & LYFT loan portfolio and the members making the loan payments and the members taking advantage of the competitive UBER & LYFT fares.
ReplyDeleteKeith - Are you serious? The NCUA is closely monitoring this situation. Well let's see how well that has played out for the NCUA. Since 2011 the Loan-2-Share Ratio was more than 116% at MelroseCU. It was over 103% at MontaukCU. It was over 164% at ProgressiveCU. It was over 105% at LomtoFCU. Through March, 2015 MelroseCU is 120%, MontaukCU is 111%, ProgressiveCU is 219% and LomtoFCU is 111% Loan-2-Share ratio. How do you say CONCENTRATION risk? Maybe the NCUA should analyze and pay attention to the Call Report Data they spend so much time collecting.
ReplyDeleteMelrose's Net Worth is approximately 20%. It represents no risk to the insurance fund.
Deleteit isn't 20% its 18.4% and it may not be enough considering medallion loans are 71% of loans and 399% of NW.
Deletethink someone once said wescorp and Telesis had enough too.
it aint the amount of capital, its the liquidity, the amount of bad loans AND the capital.
uber and lyft changed the game and you cant heard those cats back in.
The latest sale price in May was $700K. It's likely that any loan made from mid 2102 to 1H 2014 is under water. Time will tell where the bottom is, but capital ratios at the CUs heavily exposed to medallion loans are likely to be stressed. They wouldn't be in court arguing their borrowers' case if they weren't worried about losses coming down the pike.
ReplyDeleteI wonder are these credit union fat cats gonna call a taxi or Uber/Lyft for courthouse transport? These fat cats should look at reducing operating expenses and take a less expensive Uber/Lyft ride. And USCentral, WesCrop, & MembersUnited posed no risk to the NCUSIF. What's a repo'd Medallian worth on E-BAY?
ReplyDeleteUber Technologies Inc., the world’s most highly capitalized startup, has dazzled investors with its growth in “bookings.” Some investors have been told the number is on pace to reach $10 billion for 2015. Investors recently valued Uber, based in San Francisco, at $41 billion, and the company plans to raise $1.5 billion to $2 billion in new funding that could value Uber at $50 billion or higher. How much you think those Medallions are actually worth? Fool's GOLD!
ReplyDeleteUber keeps little of the money from all those bookings. After payments to drivers and discounts on rides, the company gets 20 cents to 25 cents of every $1, say people familiar with its finances. If Uber were publicly traded, it would report the smaller number as net revenue, these people add.