Manchester Inc. (OTCBB: MNCS)

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Just as mortgage companies found a bounty of opportunity working with individuals with less than stellar credit, savvy auto sellers and financiers are blending their services to provide buyers with limited or less than perfect credit the opportunity to purchase a vehicle.  By making the financing available on the car lot they are effectively enabling the vehicle.s sale and capturing their own exit traffic into another profit center.

Today's featured company, Manchester Inc. (OTCBB: MNCS) employs the better mousetrap concept of  "Buy-Here/Pay-Here."  Other successful companies that have employed similar concepts include America's Car-Mart Inc. (NASDAQ: CRMT), Autonation Inc. (NYSE:AN), and Carmax Inc. (NYSE:KMX).  Please take a few moments to read recent news from Manchester Inc.

*NEWS* from MNCS

Press Release 
Source: Manchester, Inc.
Friday November 17, 9:19 am ET

DALLAS, Nov. 16 /PRNewswire-FirstCall/ -- Manchester, Inc. (OTC Bulletin Board: MNCS - News) today announced that the Company has signed a binding term sheet to acquire all of the outstanding stock of JC Wink Inc., doing business as "Americars," in an all cash transaction. The binding term sheet provides for a definitive agreement to be executed and the closing to occur within thirty days, pending completion of due diligence.

Americars is one of five strategic dealerships Manchester has been negotiating to acquire as it continues to build its "Buy-Here/Pay-Here" used car businesses in the Central Texas market, from Georgetown in the North to San Antonio in the South. Earlier this year, the Company announced the acquisition of Nice Cars, Inc., a privately held Buy-Here/Pay-Here auto dealership as well as its affiliate Nice Cars Capital Acceptance Corporation, a credit acceptance company.

Manchester Inc. expects to execute binding term sheets with the shareholders of the remaining four companies shortly and proceed with due diligence immediately thereafter with the objective of closing within thirty days of execution. The combined five dealerships would add a capacity to sell an additional 1,500 vehicles per month that could translate into more than $200 million in additional annual sales for Manchester.

Americars is owned by South Texas banker and former Hondo, Texas new car dealer (Chevy Buick Oldsmobile Pontiac) John C. "Jackie" Winkler. Americars was organized in 1998 and currently operates one large Buy-Here/Pay-Here outlet and a separate service center in San Antonio, Texas. A second location is presently being remodeled with an anticipated opening in mid-December 2006. These locations, together with a third location under option, are expected to provide substantial company growth potential throughout the entire community.

In addition to these five dealerships, Manchester is presently completing negotiations for additional Buy-Here/Pay-Here dealerships throughout the country and expects to announce several binding term sheets before the end of 2006.

Richard Gaines, an executive of Manchester, Inc. stated, "This cluster of five dealerships in Central Texas marks the beginning of our group acquisition strategy. We are in advanced discussions with several dealerships throughout the U.S. These dealerships are mature established dealerships with existing revenue and earnings that provide operational, managerial, as well as strategic and efficient advantages for Manchester. By developing through acquisition and enabling the dealerships to individually expand within their local territories, the goal of Manchester Inc. is to become the preeminent Buy-Here/Pay-Here company in the country."

You may view the entire news release HERE
 

Putting Good People in Good Cars

Manchester, Inc. (OTCBB: MNCS), headquartered in Dallas, Texas, seeks to create the preeminent company in the "Buy-Here/Pay Here" auto business; selling and financing used vehicles to credit impaired borrowers. The Company intends to sell acquired and newly generated receivable portfolios through a securitization process and deploy the proceeds to pay off loans utilized to acquire such receivables. On October 4, 2006, Manchester acquired Nice Cars, Inc. and Nice Cars Acceptance Corp.   Nice Cars, Inc., headquartered in Chattanooga, Tennessee, operates six automotive sales lots that focus exclusively on the Buy-Here/Pay-Here segment of the used car market. 

"Buy-Here/Pay Here"dealerships sell and finance used cars to individuals with limited credit histories or past credit problems. Nice Cars Acceptance is a financial services affiliate of Nice Cars, Inc. that purchases the retail sales contracts of Nice Cars, Inc. and assumes all rights and responsibilities with respect to sales contracts with varying terms, generally ranging from 36- 60 months.
 

Under the banner of, "We Help. We Listen. We Understand. We Care" MNCS knows that people have difficulties or problems at various stages in their lives and often these difficulties can create financial problems.  MNCS helps individuals with troubled credit or no established credit to finance a quality car and simultaneously re-establish credit.
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The Industry

The .Buy-Here Pay-Here. auto business is a $50 billion Industry that sells pre-owned cars to sub-prime buyers at high margins and high rates These dealers typically utilize banks, insurance companies, credit unions, or other regulated lenders to provide revolving credit.  Most of the time the lenders are regulated and local in nature with a focus on net worth often outside of the portfolio. After satisfying the lenders, the dealers may often experience financing restraints emanating from the regulators. Consequently, many dealers spend more time holding financing together than on building and managing the operating business. Those that are able to obtain expansion funding may do so at their peril, with lenders imposing stricter criteria that undermines liquidity and uses existing portfolio equity to subsidize additional growth. The Manchester model addresses these issues, welcomes expansion, eliminates personal guarantees, provides liquidity, and moves financing from Main Street to Wall Street.

The current disparity between the availability, magnitude, and terms of financing to some .Buy-Here Pay-Here. auto dealers versus others presents Manchester with a familiar opportunity . an opportunity to become a dominant player in a market due to a particular expertise and access to funding that competitors do not have. Such opportunity existed in the past with the real estate market during the S&L crisis when cash purchases were required in asset sales through the Resolution Trust. Local businessmen were mainly brokers for deals they identified because conventional regulated funding was not available. Similar dynamics and opportunity are now present in this segment of the pre-owned car business.
 

Investment Considerations

The target customers are good people with bad credit and those in the growing non-bank sector (those who can not even get a bank to open an account for them and must deal in cash). If the economy dips, this population only increases. It can be wives of deadbeats whose credit was destroyed by a husband and they are trying to rebuild on their own . it is difficult for anyone to rebuild without a vehicle.

Unlike new cars, these cars do not depreciate during any time of a repo. For  example if a Toyota Camry with 50,000 miles sells for $12,000, then if it is repo.ed in six months (after six months of payments by the way) and now has 55,000 miles it will still be sold for $12,000. In this way, more money can be made on repo vehicles than those that go to term.

The credit facility provides for leverage of 80% of receivables in the case of acquisitions and 60% in the case of new receivables generated after acquisition. This allows for more cash to be generated to pay off a target company.s existing lender and generate additional cash to be used as the cash component in paying the Seller. The acquired receivables are subsequently sold and the debt is paid off but Manchester Inc. still owns the acquired company with no debt and that company still generates new receivables every day. Since there will only be 60% debt against those receivables, the profit is tremendous when they are sold.

The terms of the debt are high but not for leverage buyout money that needs to move fast. The continuous sale of receivables to pay off debt limits the significance of high priced debt. Also, there are 100% of receivables paying 20% or more paying down a debt that is between 60% and 80% of the face amount at 17%. Furthermore fees are only one time, there is no prepayment penalty, and it is revolving so each time the loan is paid off it can be borrowed again and again and again with no fees to make further acquisitions, Consequently, the $300 million credit can be used to acquire several billion dollars in receivables and the underlying companies. It is very conceivable to grow in one year to a size where new receivables are being generated at a rate of more than $1 billion per year at 60% leverage and being sold at face for a gain of $400 million.

The receivables are installment contracts and the revenues are only recognized over the term of the contract and not in one year. The expenses associated with those contracts such as commission, lot expenses, and salaries are all current expenses, so as long as these companies continue to grow most if not all income taxes get deferred. The money borrowed against receivables is a loan and not income. At the time of sale a taxable event will take place but there is tremendous cash generated to pay the associated taxes.
 

Additionally, companies that sell their business to Manchester have this value proposition to consider:

•  Sellers escape personal guarantees
•  Have greater liquidity for their investment
•  Ability to compete with drive-time type products
•  Ability to expand production from existing facilities
•  Participation in growth through stock ownership with no direct exposure to securities matters
•  Corporate management and financing matters are no longer an operating issue
•  Ability to utilize higher margin, lower payment products resulting from a securitized product
•  Favorable capital gains treatment on the sale of their businesses
•  Continued operational security through employment agreements

Other Recent News From Manchester Inc.

Press Release Source: Manchester, Inc.
Thursday October 19, 4:35 pm ET 

DALLAS, Oct. 19 /PRNewswire-FirstCall/ -- Manchester, Inc. (OTC Bulletin Board: MNCS - News) is pleased to announce that its corporate and securities counsel in New York is in the process of preparing an application for the company's stock to be listed and traded on the American Stock Exchange. The Company expects the application to be submitted shortly. 

To read the complete release and disclaimer, Click Here.

Press Release Source: Manchester, Inc.
Tuesday October 24, 9:35 am ET

DALLAS, Oct. 24 /PRNewswire-FirstCall/ -- Manchester, Inc. (OTC Bulletin Board: MNCS.OB - News) today announced that the Company has appointed the public accounting firm of Rodefer Moss & Co, PLLC ("Rodefer Moss") as its new independent auditor effective October 20. Rodefer Moss had previously undertaken and completed the three year combined audit of Nice Cars, Inc. and Nice Cars Capital Acceptance Corporation in connection with the October 4, 2006 acquisition of These companies by Manchester Inc. The financial statements of the Nice Cars companies audited by Rodefer Moss were included as exhibits to the Company's disclosure statement filed on Form 8-K with the U.S. Securities & Exchange Commission on October 11, 2006.

Rodefer Moss is a regional accounting and consulting firm which Operates from offices in Knoxville, Nashville, Greeneville and the Tri-Cities Of Tennessee. Rodefer Moss is a registered member of the Public Company Accounting Oversight Board. They are also a member of the AICPA Center for Public Company Auditing Firms. Rodefer Moss serves many of the Strongest private companies, governmental units and non-profit organizations in Middle and East Tennessee, Western North Carolina, and contiguous states. Rodefer Moss also serves several large national and international companies, including other public companies.

To read the complete release and disclaimer, Click Here.
 

Financial Highlights For MNCS

Recent Trade: $3.40 (11/17/06)
Ave. Volume:  477,189 (3-Month)
Market Cap: $120.95M (approx.)
52-Week Range: $2.70 - $8.60
Fiscal Year Ends: 30-Nov
Shares Outstanding: 33.14 Million
Float: 19.94 Million
State of Incorporation: Nevada

ABOUT THE RECENT FINANCING OBTAINED BY MANCHESTER
AND THE PURCHASE OF NICE CARS INC.

Under the terms of the agreement, Manchester, Inc. paid an aggregate of $25 million in cash and issued 6.25 million shares of the Company's common stock to the previous owners of the two entities, aggregating to a total value of $72.5 million based upon the average trading price of the Company's common stock on the day of Closing.. In addition, the owners of these entities will receive 5 year employment contracts to continue running the dealerships. The Company financed the cash portion of the purchase price through the utilization of its $300 million credit facility.

TO CONTACT MANCHESTER INC.

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