Debt Purchasing

Greenfish Fund Purchases Another Large Medical Debt Portfolio

2009-11-06T08:26:40-07:00

PHILADELPHIA—Greenfish Fund II, LP, a leading buyer of healthcare receivables, announced today that it successfully completed the acquisition of another portfolio of accounts receivable from a large non-profit hospital system. The cumulative face value of accounts purchased since the inception of the first Greenfish fund in early 2008 now exceeds $950 million. Greenfish expects to surpass the important $1 billion milestone by the end of 2009.

Commenting on the purchase, Greenfish Fund II 's Managing Director, Eric Raymond, said, “Hospitals are facing severe margin contraction as a result of declining reimbursement levels and increasing self-pay and insurance-related bad debt. Recently enacted Medicare and Medicaid audits create enormous administrative cost and threaten even to rescind past reimbursement. In purchasing old receivables, which have typically already been written-off, Greenfish provides hospitals with much-needed immediate cash for an otherwise dormant asset. A meaningful trend we are seeing is that hospitals are now willing to sell accounts receivable much earlier in the cycle than in the past.”

About Greenfish Fund II, LP
Greenfish and its predecessors have been active buyers of healthcare-related receivables since 2006. Capital deployed to purchase accounts has grown by double digits every year and is expected to increase again—by 100% or more—in 2010.

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Debt Purchasing Takes Center Stage at ACA International Fall Forum

2009-11-06T08:13:41-07:00

The debt buying and selling industry has undergone significant changes in the last year as a result of the economy, credit crunch and the regulatory landscape, all of which were touched upon Thursday at ACA International’s Fall Forum in Chicago.

Today’s asset purchase and recovery management business is quite different than it was when we entered it, noted Steve Leckerman, executive vice president and chief operating officer of NCO Financial Systems, Inc.

Only 20 years ago, the average primary fees were in the low 30 percent range; the secondary fees consistently were 50 percent. Recovery percentages were in the mid-to upper 30 percent range and the secondary recoveries averaged about 6 percent, according to Leckerman.

“Average balances at placement were around $400 and insurance recovery could make up more than 60 percent of the dollars collected for clients in primary collections,” Leckerman said.

The industry itself had less focus on compliance; more volume, higher commissions and higher liquidations. More clients were selling and more agencies were in the network receiving business. Money was available for the consumer to borrow.

Debt buying was a robust segment of the business with willing buyers and willing sellers. Both large and small debt buyers did well.

Between 2005 and 2007, the collection industry was flat even though consumer debt and delinquencies had grown to unprecedented levels.

“There’s a perfect storm going on right now,” Leckerman said, pointing to the debt, delinquencies, recession, reduced credit availability, low consumer confidence and the complex regulatory environment.

“If you do business with large banks, utility companies or other large firms, they are looking to cut costs; health care is fearful of rules changing,” Leckerman said. “You’re working with more middle-class debtors. They’re more sophisticated consumers, so they will file more complaints. We have attorney creditors who are like regular customers.”

Competition is fierce in this type of environment, Leckerman said. “In today’s environment, an agency needs to deliver consistent best performance. Second is not good enough. You have to be able to adapt to clients’ ever increasing demand for data. They want performance metrics down to metrics for the employees.”

Leckerman also encouraged the audience to protect their clients’ brands and to seek to be an industry leader.

To succeed in the industry today, Leckerman said, a firm needs to have a winning attitude; accountability at every level; the right strategy; flawless execution, even on “the small stuff;” face time with regulations and have a self-regulation initiative.



Valuation and Divesting

Among the common threads of many of the deals so far this year, according to Brian Greenberg, managing director of Greenberg Advisors, LLC, is that more distressed companies are seeking liquidity and debt buyers are seeking debt/equity funding partners.

Greenberg added that investors are seeking portfolios offering growth of at least 15 percent annually and similar performance in terms of profit margins. But the investors won’t take the buyers word for past performance, investors want substantive proof.

Investors are also interested in business partners that offer a niche focus or some type of differentiation from other potential acquisitions. An excellent, tenured management team, efficient technology, good analytics and “sticky” clients are other attributes investors are seeking.

“Due diligence is more intensive today,” added Robert Castle, managing director, investment banking, for Northland Securities, Inc. “Check with your advisors [before a transaction]. There is no such thing as being over-prepared.”

As compliance and regulation continue to become bigger factors and consume more of a firm’s resources, it will become increasingly difficult for small and mid-sized companies to compete, Greenberg and Castle added. One factor that could affect the timing of some deals in the next five quarters is the change in capital gains taxes, which they expect will take effect after 2010.

Debt Buyer Licensing

Companies making acquisitions should closely examine state laws, particularly if a transaction brings them into new locations, advised Valerie Hayes, ACA International vice president for legal compliance and government affairs.

Each state has its own rules for the licensure of debt purchasers (there are a couple without specific rules), Hayes said. Among these rules is the actual definition of a debt purchaser.

“Some states differentiate between active and passive debt purchasers,” Hayes added. “You need to be aware of the guidance provided by state regulators in interpreting licensing statutes.”

For example, in Connecticut, state law prohibits “consumer collection agencies from purchasing or receiving assignments of claims for the purpose of collection or to institute suit.”

Loss Prevention Techniques

One of the biggest factors in avoiding unexpected losses in debt purchase transactions is to use carefully drafted contracts, said Hayes and Janis St. Martin, administrative vice president for the Collector’s Insurance Agency, Inc., a subsidiary of ACA International.

In reviewing these contracts, firms should seek legal assistance and conduct thorough due diligence, Hayes and St. Martin advised, recommending that thorough due diligence firms review contracts executed by others.

They also recommended that debt buyers and sellers pay particular attention to the hold-harmless clause and the liability assumed or transferred in the contract. Debt owners are routinely named in lawsuits against collection agencies.

Collectors Insurance Agency offers liability insurance for contractual liability. Errors and omissions insurance can also mitigate some of the risk in debt transactions.

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Lowell Group Tops Charts in OC&C Credit Management and Debt Collection Index

2009-11-06T08:13:41-07:00

Leeds-based debt buyer Lowell Group has come top of the charts for the second year running in the OC&C Credit Management and Debt Collection Index.

Lowell scored 63 points in the 2009 index, three less than last year, just beating hybrid Capquest, which rose from eighth to second with 62 points. The annual index, compiled by strategy consultancy OC&C and published exclusively in Credit Today, uses quantitative and qualitative measures to rank credit management and debt collection companies in the UK and Europe.

This year the index reflected a turbulent year in the industry, with dramatic alterations in many of the scores compared with 2008. However, one of the report’s author’s – OC&C managing partner David Hosein – said the credit crunch was no excuse for poor performance. “The writing was on the wall for people who had not improved their businesses before,” he said.

Last year OC&C predicted that Lowell’s clear strategy of focusing on low balance UK debts would be an advantage in a downturn and it has enjoyed “stellar growth and financial performance” since. The low balance focus means it has been less susceptible to declines in settlements and its arrangements are also holding up. This year it has also acquired trace business J2, allowing it to hold onto another strategic advantage.

Capquest, meanwhile, is the index’s rising star. Operationally excellent, it has mastered onshore and offshore capabilities with a South African call centre, and has a strong management team. It covers all elements of the loan lifecycle and has entered the mortgage collections market as well as being an early adopter of compliance and security standards. Its challenge is now to manage its diversity, said OC&C.

The Lewis Group, another debt buyer, came third in the index from thirteenth last year – praised for its range of techniques and size as well as top line growth. Parent company Cattles may have struggled but this means it is less likely to be dependent on the parent, said OC&C.

Following Cattles, Lindorff scored 49 points and moved up the index one place to fourth. The European giant’s strategy “goes beyond hybrid” said OC&C, with scale, size and a good management team. Operationally successful in many countries, it is a rarity in the purchase market. In fifth place is Cabot Financial, dropping from 61 points and fourth place to 49 points in 2009. OC&C said the size and scale of the debt purchaser has kept it in the top five but believes it to be on a downward trajectory and facing numerous challenges.

Also praised by the index authors as “rock steady ships” are debt collection agency BCW Group, bailiffs Equita and debt solutions provider Invocas. However, debt buyers 1st Credit and Aktiv Kapital suffered, plummeting from joint second positions last year. For the full index visit http://www.credittoday.co.uk/filestore/homePDF/CT_Oct09_occ2.pdf

The index is not intended to be used as an investment guide or as a way of identifying businesses that will fail.

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ACA International Board Halts Plans for Self Regulation in Collection Industry

2009-11-05T03:00:57-07:00

ACA International’s Board of Directors moved quickly Wednesday to halt proposed legislation that sought to create a self-regulation structure for the debt collection and purchasing industry after complaints from some of the board members.

The plan would have included federal mandates for state licensing and registration for agencies and collectors, and called for an industry education program run by ACA International.

Some board members told insideARM that ACA’s executive committee submitted the proposal in late September to Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, as an amendment to legislation that would create the Consumer Financial Protection Agency (CFPA). Sources said Frank could have introduced the proposal within two weeks.

In July, ACA board members gave its executive committee the power to study and, if feasible, draw up a plan for a self-regulatory structure, complete with a nationwide debt collector registry and dispute resolution program.

But during a special meeting Wednesday of the board at ACA’s annual Fall Forum Conference in Chicago, directors voted to take away that authority. The board also directed the executive committee to withdraw, in writing and within 24 hours of the meeting’s end, its amendment proposal, and confirm to all board members the proposal’s withdrawal to Rep. Frank and other political bodies by Friday.

ACA National Board of Director member Jerry Greenblatt told insideARM he was “very happy” with the outcome of the vote. “What’s happened with the passage of this motion is that the decision making within ACA is slowly being given back to ACA members.” He added that the vote to withdraw the proposal “is a great victory for the members of the association, especially the small and mid-size agencies.”

ACA spokesman John Nemo told insideARM that the association will continue to study the issue while incorporating and addressing the concerns of the membership.

“We are a member driven organization. We listen to our membership,” Nemo said. “There was no intent to try to deceive anyone or do anything behind the scenes. We understand that this is an incredibly sensitive and important issue, perhaps the biggest one since the Fair Debt Collection Practices Act (FDCPA) passed, and we want to make sure we do as good a job as possible of being transparent about the process and making sure our board of directors and our membership at large are informed and able to give their input.”

ACA’s actions regarding a self regulation program raised questions within its membership and in the broader accounts receivable management industry.

Emil Hartleb, executive director of Commercial Collection Agency Association, told insideARM that ACA’s approach to self regulation was “fraught with danger for the industry.”

“Anytime you look at licensing or registration, there are unintended consequences that will come out. We don’t need more licensing. What we need is hard enforcement against rogue agencies who are committing these atrocities,” Hartleb said.

David Goch, legislative counsel for the Commercial Law League of America told inside ARM he was “surprised” to learn about a proposal by ACA to apparently legislatively create a debt collection industry licensing body.

Lloyd Dix, vice president and general counsel of Union Adjustment Co. in Burbank, Calif., said ACA’s amendment proposal has some California Association of Collectors (CAC) members considering renewing its motion to amend its bylaws requiring CAC members to also be ACA members (“California Association of Collectors Votes to Stand Pat on ACA Membership Ties,” Sept. 25). Dix is also the chairman of the Legislative Council for the CAC.

Days before the meeting and vote, Rubin attempted to explain the executive committee’s action in a letter to the ACA Board of Directors.

In her letter, Rubin said ACA submitted the proposal, modeled after the SAFE Act for the mortgage brokerage industry, after a failed attempt to get Rep. Frank to include an exemption of the debt collection and asset purchase industry from CFPA oversight in legislation to create the new regulatory agency.

“He indicated there would be no carve out for the collection and asset purchasing industry and he would consider introducing the SAFE Act amendments for the collection and asset purchasing industry as a floor amendment,” Rubin wrote of ACA’s meeting with Frank.

Critics of the proposal, however, said it would drastically change the debt collection industry and was potentially more damaging than governance by the CFPA because on the surface, the proposal appears to require collectors and asset purchasers to obtain a license in each state they conduct business.

Some key elements of ACA’s proposal included a call for:

All agencies and asset purchases to be licensed and registered by their state or by the CFPA if no state licensing and registration program exists one year of the legislation is passed.
ACA International to be the sole provider of all training materials associated with 20 hours of mandated initial education required to be licensed, under the scheme the amendment proposes and 8 hours of education necessary for annual renewals
Every collection agency must be licensed by the state as a debt collector before engaging in the collection of debt
Every individual debt collector must work for a state-licensed debt collector and must be individually registered by the state as a debt collector within 90-days of employment
The proposal also called for each collector to be subject to criminal background checks, finger printings by the Federal Bureau of Investigations and criminal background checks
Establishment of national licensing for states which do not adopt their own state licensing programs, with no preemption of state laws, thus adding an additional level of bureaucracy.

Greenblatt, who is also President-elect of the CAC, called the proposal “a monumental detriment to small and mid-sized debt collection agencies because of the additional costs and burden, and the monopoly that ACA attempted to mandate through federal legislation on education.”

Dix said the resolution program proposed also did not preempt any state or federal legal actions or bar any judicial remedies. “It was quite a blow when we saw it,” Dix said. “We had no idea it was coming.”

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Comtech Systems Partners with Service Exchange Network On Debt Collection Process Serving

2009-11-04T08:13:57-07:00

Glen Carbon, IL — Comtech Systems, Inc. and Service Exchange Network, LLC announced today a strategic partnership to connect users of Comtech’s Collect! ARM solution with Service Exchange Network’s Serve-X . The alliance will give users of Collect! the ability to streamline the operational efforts to serve documents due for process and actively monitor their status.

Both companies are market leaders in their respective areas.

Comtech Systems Inc. recognizes the necessity to enhance the operational efficiencies when accounts are moved to a state of process serving. Comtech has an understanding of both the labor and administrative efforts required to execute and monitor process serving mechanisms during the litigation procedure. H. Neal Cropper, CEO states "We are excited about the opportunity to harness the powers of the Serve-X technology to reduce overall costs and efforts required of our clients to execute process serving. Serve-X offers a platform that not only reduces levels of effort but enhances the tracking capabilities during this procedure. We look forward to the future with Serve-X as a best of breed strategic partner to provide yet another aspect to Comtech's growth as a full ARM solution provider."

Service Exchange Network, LLC realizes the essentialness of assisting Law Firms and Process Serving companies to produce more with fewer resources. The affiliation with Comtech Systems, Inc establishes Server-X as a world-wide provider of data and document exchange.

“We are enthusiastic about the relationship that has been built with Comtech Systems, Inc. as this will promote Serve-X to a vast amount of clients in the collection industry. We believe that Comtech is a progressive company and together with Service Exchange Network can revolutionize how the collection industry communicates to companies that offer process service”, said Greg Kellerman, President of Service Exchange Network, LLC.

About Comtech Systems, Inc:
Comtech was founded in 1988 and is headquartered in Victoria, BC, Canada with an additional office in Brisbane, Australia. Comtech's flagship product, Collect!, is widely recognized as the leading business management software solution for the world's receivables management industries.

Comtech's software is installed in 38 countries by over 1,200 companies including collection agencies, debt buyers, credit grantors, medical and dental billing offices, legal offices, municipal fine collection offices, car dealerships, rental application verification offices, credit grantors and a host of finance, credit and billing organizations.
For more information please contact: Robert Rutherford, VP at 800-661-6722, sales@collect.org or visit our website at www.collect.org

About Service Exchange Network, LLC
Service Exchange Network, LLC, (Serve-XTM), is an Illinois-based company founded in 2008. Serve-XTM was created to establish a cooperative bi-directional data transfer solution which is available to any independent Process Server or Attorney firm desiring to significantly mitigate costs and enhance their technology. Serve-X provides the technology that enables multiple attorneys to communicate with multiple process servers through interface integrations with software vendors.

Serve-XTM was launched nationally at the 2009 NARCA convention held in Boston, Massachusetts. It was an immediate success amongst Attorneys and Process Servers in attendance for its ease of use and uncomplicated design. Service Exchange Network, LLC members are supporters of NAPPS, CALSPRO, WAD, WADI, ACA, NARCA and CLLA.
For more information please contact: Kimberly Brown, Customer Support Specialist at 888-573-7839 ext 11, kimb@servex.biz or visit our website at www.servex.biz

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The Receivables Exchange Stands Ready to Assist Small Businesses Searching for Alternative Financing in Wake of CIT Bankruptcy Filing

2009-11-04T08:13:57-07:00

After months of efforts to stay afloat, CIT Group's filing for bankruptcy Sunday sent shockwaves through the small and midsize business community, particularly retailers and manufacturers. Many CIT customers have been contractually bound to CIT even as the nation's single largest lender to small and midsize companies struggled on life support. Now, those companies have a reliable alternative as The Receivables Exchange announced today that it stands ready with more than $20 billion in liquidity to help CIT customers to fill their liquidity gap. The Exchange allows companies of all sizes and from all industries to post their outstanding invoices on its real-time auction trading platform where a global network of accredited institutional investors competitively bid to purchase the receivables.

"The Receivables Exchange's market-based solution is perfectly positioned to help CIT customers gain quick and easy access to a reliable, competitive source of capital so they can continue to fund their day-to-day operations," said Bill Andersen, founder and portfolio manager of Andersen Capital Management. "As a receivables Buyer on the Exchange, we have seen firsthand the value of the Exchange's centralized marketplace. The Exchange helps Sellers turn their receivables into cash quickly and easily on their terms while providing Buyers with a reliable, short-term investment opportunity."

Many of the nearly one million businesses that rely on CIT for working capital, including manufacturing and retail companies, had been legally bound to continue working with CIT as a single funding source, even though they were left vulnerable due to the lender's ongoing struggles. However, with the recent bankruptcy filing, those companies are now eligible to utilize alternative funding sources and many are actively seeking additional sources in order to stay afloat.

"The bankruptcy filing of CIT Group represents a historic and regrettable turn of events for the small business community and for our economy," said Justin Brownhill, co-founder and chief executive officer of The Receivables Exchange. "Thousands of business owners are seeing their single source of liquidity evaporate before their eyes. Sunday's filing underscores the fact that companies can no longer rely on one primary source of liquidity. It is imperative that they have broad access to competitively-priced capital. The Receivables Exchange stands ready to provide a diversified source of liquidity to help CIT customers maintain the strength of their businesses."

The Receivables Exchange, which has seen an increased use of receivables financing by businesses of all sizes and across more than 40 industries, reported quarter-over-quarter growth of nearly 200% in the third quarter 2009. Businesses are signing on to tap into the $20 billion of liquidity available on the Exchange's transparent, centralized marketplace for receivables financing.

Most businesses wait 60+ days to receive payment on their outstanding invoices - many even longer as their larger customers are slowing down payments to meet their own cash flow needs. Members of The Receivables Exchange no longer have to wait for prolonged periods for their outstanding invoices to be paid. On the Exchange, companies can post their receivables one day and receive their funds as soon as the next business day.

About The Receivables Exchange
The Receivables Exchange (www.receivablesXchange.com) is the world's first online marketplace for real-time trading of accounts receivable. Changing the landscape of small business financing, The Receivables Exchange provides a new dimension in working capital management. The Exchange connects a global network of accredited institutional investors (Buyers) to the nation's millions of small and mid-sized businesses (Sellers) in search of capital to grow. Buyers get direct access to an $18 trillion new investable asset; Sellers gain access to a new competitive working capital management solution by having their receivables bid on in real-time by multiple Buyers.

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Asset Acceptance Reports Net Loss in Third Quarter 2009

2009-11-03T07:59:14-07:00

WARREN, Mich.-- Asset Acceptance Capital Corp. (NASDAQ: AACC), a leading purchaser and collector of charged-off consumer debt, today announced results for the quarter ended September 30, 2009.

Highlights from the third quarter include:

Acquired $37.2 million (net of buybacks) in charged-off consumer receivable portfolios, with an aggregate value of $1.6 billion, or 2.32% of face value;
Cash Collections of $77.8 million;
Operating expenses of 61.8 percent of Cash Collections; and
Expanded borrowing capacity to $84 million with amended credit agreement financial covenants.

Rion Needs, President and CEO, commented: “Our cash collections during the quarter, particularly on older vintage portfolios, were unfavorably impacted by the ongoing macro-economic landscape that continues to hinder consumers’ ability to repay their obligations. We began to execute on our strategy to leverage the attractive pricing conditions for our paper, increasing our purchasing by roughly 80% during the third quarter versus the second quarter of 2009. In addition, we believe that our now expanded capacity under the amended credit facility coupled with the more advantageous pricing environment positions us well to execute on our strategy in the remainder of 2009 and into 2010.”

Needs continued, “While the current macro backdrop remains challenging, we are in a position to increase both our operational efficiency, as well as our capacity to positively impact liquidation rates going forward. In the coming months we will be unveiling new technology that will automate several of the key functions of our call center representatives, increasing their efficiency substantially and allowing them to focus their time on accounts that they are most likely to liquidate. Additionally, we have made solid progress in achieving our goal of increasing collection account representative headcount, and signed a third-party agreement with an offshore firm on a per seat basis to expand capacity by 20% by year-end. While the last several quarters have been difficult, we have implemented a number of initiatives and strategies to make us more successful as market conditions improve.”

Third Quarter 2009 Review

Asset Acceptance reported cash collections of $77.8 million in the third quarter ended September 30, 2009, versus cash collections of $90.8 million in the year-ago period.

Total revenues were $47.7 million in the third quarter of 2009, compared to total revenues of $58.4 million in the third quarter of 2008. Amortization of purchased receivables in the third quarter of 2009 was 39.0% of total cash collections versus 36.0% of total cash collections in the third quarter of 2008. The Company reported a third quarter of 2009 net impairment charge of $6.8 million on purchased receivables, versus a net impairment charge of $3.1 million in the prior year quarter.

The net loss for the quarter was $1.6 million, or $0.05 per fully diluted share, compared to net income of $3.0 million, or $0.10 per fully diluted share, in the third quarter of 2008. Earnings Before Interest, Taxes, Depreciation and Amortization, including purchased receivable amortization (“Adjusted EBITDA”), decreased to $32.6 million in the third quarter of 2009, down 22.8% compared to the year-ago period. Please refer to the table on page four, which reconciles net income according to Generally Accepted Accounting Principles (“GAAP”) to Adjusted EBITDA.

During the third quarter of 2009, the Company invested $37.2 million to purchase charged-off consumer debt portfolios with a face value of $1.6 billion, for a blended rate of 2.32% of face value. This compares to the prior-year third quarter, when the Company invested $35.6 million to purchase consumer debt portfolios with a face value of $718.8 million, representing a blended rate of 4.95% of face value. All purchase data is adjusted for buybacks.

In addition to lower cash collections in the quarter, the Company reported lower operating expenses compared to the prior year. Total operating expenses in the quarter were reduced 4.0% to $48.1 million, from $50.1 million in the third quarter of 2008. For the 2009 third quarter, Asset Acceptance reported operating expenses of 61.8% of cash collections, up from 55.2% of cash collections in the prior year quarter.

Nine Months Ended September 30, 2009

For the nine-month period ended September 30, 2009, the Company reported cash collections of $259.2 million compared to cash collections of $286.2 million in the first nine months of 2008.

Total revenues in the first nine months of 2009 were $153.7 million versus $179.2 million in the first nine months of 2008. For the first nine months of 2009, amortization of purchased receivables was 41.0% of total cash collections versus 37.8% of total cash collections in the same period of last year. Net impairments for the first nine months of 2009 totaled $17.1 million, versus $8.4 million for the first nine months of 2008.

Net income in the first nine months of 2009 was $3.8 million, or $0.12 per fully diluted share, compared to net income of $11.9 million, or $0.39 per fully diluted share, in the same period of 2008. For the nine-month period ended September 30, 2009, Adjusted EBITDA declined to $125.1 million, a decrease of 11.8% when compared to the same nine-month period in 2008.

The Company invested $79.1 million to purchase charged-off consumer debt portfolios with a face value of $3.1 billion, for a blended rate of 2.57% during the first nine months of 2009, compared to $122.3 million with a face value of $3.2 billion, for a blended rate of 3.85% in the same period of 2008. All purchase data is adjusted for buybacks.

Amended Credit Agreement

Asset Acceptance also announced the signing of an amendment to its credit facility led by JPMorgan Chase Bank, N.A. Under the terms of the Credit Agreement, the Company has a five-year $100.0 million revolving credit facility expiring in June 2012 and a six-year $150.0 million term loan facility expiring in June 2013. The amendment loosened two of the more restrictive financial covenants within the agreement and made other changes:

The Leverage ratio has been loosened to 1.5 to 1.0, from 1.125 to 1.0, for approximately 2 years. At December 31, 2011, the leverage ratio will step down to 1.25 to 1.0 through expiration.
The planned step down of the Total Liabilities to Tangible Net Worth ratio on December 31, 2009 from 2.5 to 1.0 to 2.25 to 1.0 has been deferred until December 31, 2011.
The Minimum Tangible Net Worth requirement was increased by $5.0 million.
The LIBOR spread was increased by 100 basis points.
The Company paid fees and other costs of approximately $1.9 million in connection with the amendment.

“We are very pleased to announce the amended credit agreement with JPMorgan Chase. Under the amended agreement, our borrowing capacity has more than doubled to $84 million, creating additional flexibility to take advantage of the improved pricing conditions in the remainder of 2009 and into 2010,” commented Mark Redman, Senior Vice President and CFO of Asset Acceptance Capital Corp. “We have also made progress with Project Grow and our planned ramp up in paper purchases. We expect to see these initiatives begin to bear fruit, in terms of both productivity and our cost to convert accounts, as we move through the next twelve months.”

Third Quarter 2009 Earnings Conference Call

Asset Acceptance Capital Corp. will host a conference call at 5 p.m. Eastern today to discuss these results and current business trends. To listen to a live webcast of the call, please go to the investor section of the Company’s web site at www.AssetAcceptance.com. A replay of the webcast will be available until November 2, 2010.

About Asset Acceptance Capital Corp.
For more than 45 years, Asset Acceptance has provided credit originators, such as credit card issuers, consumer finance companies, retail merchants, utilities and others an efficient alternative in recovering defaulted consumer debt. For more information, please visit www.AssetAcceptance.com.

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Portfolio Recoverys Net Income Falls in Third Quarter

2009-10-30T06:33:45-07:00

Debt buyer and collector Portfolio Recovery Associates said late Thursday that its net income for the third quarter of 2009 dropped compared to the same period a year ago.

Norfolk, Va.-based Portfolio Recovery Associates, Inc. (Nasdaq: PRAA) reported net income of $10.1 million, or $0.65 per diluted share, for the quarter ended September 30, 2009, down 12 percent from net income reported in the year ago quarter. Analysts polled by Thompson Reuters had anticipated earnings of $0.77 per share for the third quarter of 2009.

PRA said that total revenue in the third quarter of 2009 was unchanged from Q3 2008 at $68.6 million. The company took an $8 million net allowance charge -- equivalent to approximately $4.8 million after tax, or 31 cents per diluted share -- against its purchased portfolios. Net impairment charges were $3.3 million in the year ago period.

"Portfolio Recovery Associates continued to perform solidly in the third quarter of 2009, despite an economy still struggling to recover from recession,” said Steven D. Fredrickson, Chairman, President and Chief Executive Officer. “Not only did the Company produce strong results operationally, but we continued to build for the future -- further refining our best-in-class platform and taking advantage of our access to capital to make significant portfolio acquisitions. An $8 million net allowance charge, equivalent to 31 cents a share, did undermine earnings growth. Nevertheless, Portfolio Recovery Associates is well-positioned to emerge from this economic downturn a stronger and more efficient competitor.”

On a conference call for investors Thursday evening, management noted that PRA’s accounting practices dictate that it take impairment charges on under-performing portfolios very quickly, while brand new portfolios that are exceeding expectations must wait at least six months to show the over performance on the company’s financial statements. They noted that this phenomenon was occurring in the third quarter of 2009, as recently purchased debt portfolios beat expectations in the period.

The company’s cash collections rose 11 percent to a record $92.4 million in the third quarter of 2009. Call center and other collections increased 11 percent to $48.6 million; external legal collections decreased 29 percent to $15.3 million; internal legal collections grew 194 percent to $6.2 million; and purchased bankruptcy collections gained 45 percent to $22.2 million when compared with the year-earlier period.

The company's fee-for-service businesses generated revenue of $14.2 million in the third quarter, down 10.1 percent from a year ago. These businesses accounted for 20.8 percent of the PRA's overall revenue in the third quarter of 2009, down from 23.1 percent in Q3 2008.

PRA purchased $1.75 billion of face-value debt during the third quarter for $76.7 million. The debt was acquired in 100 portfolios from 12 different sellers. The company said that 95 percent of the debt was credit card accounts, with the balance comprised of utility and installment loans. Of the accounts, 61 percent were in bankruptcy.

Management said that at the end of the quarter, the company employed 1,312 collection staff.

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The Receivables Exchange Stands Ready to Fill the Liquidity Gap in CIT Fallout

2009-10-30T06:33:44-07:00

NEW ORLEANS - As CIT struggles to gain bondholder support to avoid bankruptcy, the nation's small and midsize businesses (SMBs) are turning to other forms of financing to fund their day-to-day operations. While CIT's uncertain outcome had left many of the nearly one million businesses that rely on the lender for working capital - particularly those in manufacturing and retail - feeling vulnerable, many are now finding that alternative sources of business financing is available to help them fund their growth, with many turning to The Receivables Exchange.

The Receivables Exchange, which has seen an increased use of receivables financing by businesses of all sizes and across more than 40 industries, reported quarter-over-quarter growth of more than 190% on the third quarter 2009 Cash Flow Receivables Index. Businesses are signing on to tap into the $20 billion of liquidity available on the Exchange's transparent centralized marketplace for receivables financing.

"The working capital limitations small and midsize companies are facing is unprecedented," said Justin Brownhill, co-founder and chief executive officer of The Receivables Exchange. "The demise of CIT will only exacerbate the struggle for these companies. For our economy - and the small and midsize companies that drive it - to fully recover, it is imperative that they have broad access to small business financing. The Receivables Exchange provides a market-based solution that delivers an efficient source of liquidity at competitive rates."

At The Receivables Exchange, small and mid-size businesses can sell their receivables on its online marketplace to a global network of accredited institutional investors. The Receivables Exchange provides a flexible, alternative source of receivables financing.

Most businesses wait 60+ days to receive payment on their outstanding invoices - many even longer as their larger customers are slowing down payments to meet their own cash flow needs. Members of The Receivables Exchange no longer have to wait for prolonged periods for their outstanding invoices to be paid. On the Exchange, companies can post their receivables one day and receive their funds the next business day.

About The Receivables Exchange
The Receivables Exchange (www.receivablesXchange.com) is the world's first online marketplace for real-time trading of accounts receivable. Changing the landscape of small business financing, The Receivables Exchange provides a new dimension in working capital management. The Exchange connects a global network of accredited institutional investors (Buyers) to the nation's millions of small and mid-sized businesses (Sellers) in search of capital to grow. Buyers get direct access to an $18 trillion new investable asset; Sellers gain access to a new competitive working capital management solution by having their receivables bid on in real-time by multiple Buyers..

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An Idea Whose Time Has Come

2009-10-29T10:33:54-07:00

From texting to iPods to smart phones, technology has dramatically changed the way we live our lives. At the end of last year when the economy soured and travel budgets were slashed, I started to wonder; “Why can’t technology be utilized to revolutionize the exhibition hall experience?”

Why can’t it? What if you could get access to all participants at an exhibition without ever leaving your desk? What if it was absolutely free to attend, so you could send all interested staffers – from the IT department to Operations? What if easy access made it possible for the entire ARM industry to attend – including credit grantors, debt buyers, and ARM service providers? What if we could make this happen? Would you participate?

We thought so and that is why we created the ARM industry’s first-ever virtual expo, Expo 3.0

Envision an efficient and cost-effective expo conducted entirely online. You can literally “visit” booths, interact with decision makers through group or private chat, see a video introduction of the company or product, and leave with relevant information and appropriate contacts – all without having to leave your desk.

^pullquoteLearn more about Expo 3.0 at http://www.insidearm.com/expo/ pullquote^

Because of the expense of travel, cost to attend, and time out of the office – not to mention the travel restrictions placed upon many professionals – many stakeholders in the process of selecting vendors haven’t been able to attend tradeshows. On the flip side, these restrictions prevent vendors from sending technicians or developers to staff their booths. That’s about to change. For the first time, entire staffs will have one place to go to evaluate products and services needed to improve recoveries. Through Expo 3.0, there are no restrictions. Everyone on both sides of the buying decision can attend without the hassles of travel.

EXPO 3.0 is free to all attendees, so senior management, IT staff, collection staff, and anyone else is able to attend from their desk. And since booths at Expo 3.0 will be available for 90 days after the live event, attendees can still get the information they need even after the live show ends.

As active participants in the affairs shaping the ARM industry for nearly 20 years, Kaulkin Ginsberg has been involved in virtually every trade show and conference geared toward credit grantors, collection agencies, collection law firms and debt buyers. This year alone, our firm participated in over 17 live events. We know and appreciate the fact that there’s no substitute for face-to-face interaction. We saw the need to address the limitations involved with live events and that is why we developed a virtual experience focused exclusively on the exhibit hall.

We truly see EXPO 3.0 as a new and powerful tool to enhance and facilitate introductions within the ARM industry, and we are committed to using all of our resources to making this a successful event for all participants. I hope we’ll see you there!

Debt Buyer Encore Capital Reports Sensational Third Quarter Results

2009-10-29T07:19:11-07:00

Accounts receivable management firm Encore Capital late Wednesday reported financial results for the third quarter marked by significant increases in collections, revenue, net income and debt purchasing activity.

San Diego-based Encore Capital Group, Inc. (Nasdaq: ECPG) reported net income of $9 million -- or $0.37 per fully diluted share -- for the third quarter of 2009, compared to $3 million earned in the year ago quarter. Analysts polled by Thompson Reuters predicted earnings of $0.27 per share for Q3 2009.

Investors cheered the news Thursday, sending Encore's shares up over 15 percent in early trading.

Revenues in the quarter grew 21 percent year-over-year to $80.4 million. Revenue from receivables portfolios was up 22.2 percent to $76.4 million while revenue from servicing fees, principally bankruptcy serving through its Ascension Capital unit, and other sources was relatively flat.

The company recorded a net impairment provision against purchased pools of debt of $4.3 million in the quarter, compared to a net impairment provision of $7.3 million during the same period in the prior year.

Encore reported gross collections of $125.7 million in the third quarter. Excluding portfolio sales, collections were $120.4 million, a 27 percent increase from the third quarter of 2008. Collections across all of the company’s three main channels – owned collection sites, legal collections, and outsourcing to debt collection agencies – increased significantly.

Legal collections accounted for $55.6 million, up 11.6 percent from the third quarter last year. Collections from the company’s owned sites were up 22.5 percent to $45.1 million. Outsourcing to third party collection agencies saw the greatest growth in the third quarter of 2009. The channel more than doubled its Q3 2008 total of $7.9 million to account for $19.7 million in collections in the third quarter of 2009.

In a filing with the Securities and Exchange Commission (SEC), Encore acknowledged the difficult economic environment, noting that “increases in unemployment, high foreclosure rates and the difficulties consumers are experiencing in obtaining credit” brought on by the recession negatively impact collections. But the company noted that the environment has also presented opportunities to acquire more debt, which it credits for the positive results in the quarter.

Encore said that in the third quarter of 2009 it invested $77.7 million for debt portfolios with face values aggregating $2.2 billion, a 17.6 percent increase from the amount it invested in the third quarter of last year. In the first nine months of 2009, the company has invested $215.7 million for debt portfolios with face values aggregating $5.5 billion, up 29.5 percent from the same period in 2008.

All of the portfolios purchased by Encore so far this year have been comprised of credit card accounts. This marks a shift from the strategy in the first nine months of 2008 when 14.4 percent of the accounts the company purchased were made up of “Other” accounts.

The company also noted in its filing that it had completed a move to a larger collection site in India. In April, Encore signed a lease on a facility in Gurgaon, India. The site will allow a headcount expansion to 1,100 from the current 350. The company's Indian team moved into the new building in September.