Asset Acceptance Completes Recapitalization with Large Special Dividend

Debt purchasing giant Asset Acceptance Capital Corp. (Nasdaq: AACC) announced late Monday that it would be paying a one-time special dividend to shareholders of $2.45 per share in the final move of its previously-announced plan to recapitalize its balance sheet and return money to its investors.

The special dividend payments will total $75 million and be paid out in cash on July 31 to shareholders of record on July 19. The dividend is the last action the company will undertake under a plan it announced on April 25 to recapitalize its balance sheet and capital structure in a move CEO Brad Bradley said would allow Asset Acceptance to “continue our proven approach of purchasing charged-off consumer receivables and being opportunistic about new revenue sources that are of long-term strategic interest to us.”

Under the plan, Asset Acceptance is returning $150 million to shareholders through a combination of the share repurchase agreement and a one-time cash dividend. The share repurchase was itself split into two components: a modified “Dutch Auction” tender offer where shareholders could sell their shares to Asset Acceptance for a set price; and a purchase agreement between the company and three of its largest shareholders.

The company said Monday it had completed the tender offer, repurchasing 1,982,250 shares at $18.75 per share, for a total price of nearly $37.2 million. The second phase of the program resulted in the repurchase of 2,017,750 shares at the same price – for a total of $37.8 million – from the group of three large shareholders of the company: the largest investor in Asset Acceptance, private equity firm AAC Quad-C Investors; company Chairman and CEO Brad Bradley; and company CFO Mark Redman.  The group cumulatively owns 50.4% of the company’s outstanding shares.  The repurchase agreement with the group was designed so that they would maintain that proportional share of ownership.  Since the total number of shares outstanding was decreased in the tender offer, the three large shareholders had to sell shares to maintain their previous ownership levels.

The recapitalization, including the share buyback plan and the dividend, was funded through a $250 million credit agreement with JPMorgan Chase with $150 million used to fund the program – $75 million to repurchase shares and $75 million for the special dividend – and $100 million to be used in the purchase of debt portfolios.

Mike Ginsberg, CEO of ARM industry advisory firm Kaulkin Ginsberg Company, said of the program, “This is not surprising that a company with solid performance like Asset Acceptance would seek to increase their capital flexibility with a program like this. This is a good deal for shareholders and a great move for the company moving forward.”