Risks and Uncertainties Related to Liquidity and Capital Resources

9 Months Ended

Sep. 30, 2013

Risks and Uncertainties Related to Liquidity and Capital Resources

Risks and Uncertainties Related to Liquidity and Capital Resources

15.  Risks and Uncertainties Related to Liquidity and Capital Resources

We currently have a significant amount of indebtedness in relation to our equity. SFC’s credit ratings are non-investment grade, which impacts our cost of, and at times access to, capital and can (depending on market conditions) affect our ability to manage liquidity and the cost to refinance our indebtedness.

There are numerous risks to our financial results, liquidity, and capital raising and debt refinancing plans, some of which may not be quantified in our current liquidity forecasts. These risks include, but are not limited, to the following:

· our inability to grow our personal loan portfolio with adequate profitability;

· the effect of federal, state and local laws, regulations, or regulatory policies and practices;

· the liquidation and related losses within our real estate portfolio could be substantial and result in reduced cash receipts;

· potential liability relating to real estate and personal loans which we have sold or may sell in the future, or relating to securitized loans;

· our inability to monetize assets including, but not limited to, our access to debt and securitization markets and our note receivable from parent; and

· the potential for disruptions in bond and equity markets.

At September 30, 2013, we had $1.0 billion of cash and cash equivalents and during the nine months ended September 30, 2013 we generated a net loss of $73.7 million and net cash inflow from operating and investing activities of $540.8 million. At September 30, 2013, our remaining principal and interest payments for 2013 on our existing debt (excluding securitizations) totaled $560.0 million. Additionally, we have $262.8 million of debt maturities and interest payments (excluding securitizations) due in the first nine months of 2014. As of September 30, 2013, we had $1.4 billion UPB of unencumbered personal loans and $1.0 billion UPB of unencumbered real estate loans. In addition, SFC may demand payment of some or all of its note receivable from SFI ($538.0 million outstanding at September 30, 2013); however, SFC does not anticipate the need for additional liquidity during 2013 and does not expect to demand payment from SFI in 2013.

Based on our estimates and taking into account the risks and uncertainties of our plans, we believe that we will have adequate liquidity to finance and operate our businesses and repay our obligations as they become due for at least the next twelve months.

It is possible that the actual outcome of one or more of our plans could be materially different than we expect or that one or more of our significant judgments or estimates about the potential effects of these risks and uncertainties could prove to be materially incorrect and such actual results could materially adversely affect us.