Debt Resolve Bounces Back

The stock of Debt Resolve late yesterday fought back from an early morning decline of 45 percent to close at $2.70, down 8 percent for the day. The stock was up slightly in midday trading today.

James D. Burchetta, Debt Resolve CEO, attributed the rebound to the company’s filing yesterday with the U.S. Securities and Exchange Commission that it plans to close on its purchase of Creditors Interchange by August 31, subject to shareholder approval. Debt Resolve and Creditors Interchange initially planned to close on the deal in June but both parties have agreed to extend the closing to the end of this month. Debt Resolve has raised $40 million in investor commitments to the deal, according to the SEC filing.

White Plaines, N.Y.-based Debt Resolve in May reported it planned pay $64 million for Creditors, including $60 million in cash and $4 million in its stock. Buffalo, N.Y.-based Creditors is a 47-year-old contingency collection agency that operates 10 call centers in the US and Canada, and a call center in India.

On Monday, Debt Resolve announced that the U.S. District Court of Appeals for the Federal Circuit on July 24 reaffirmed the company’s patent protection on its online system. Debt Resolve said that the court ruled in favor of a firm called Cybersettle Inc. in a suit against the National Arbitration Forum.

Burchetta said it is the second time a federal court has upheld Debt Resolve’s rights to the patent. He said Debt Resolve owns the patent on the Internet-based consumer-debt auction model system while Cybersettle owns it for insurance claims. Burchetta said he shares the patent with Charles S. Brofman, the president and CEO of privately held Cybersettle.

Bronfman is cochairman of Debt Resolve and a member of its board, according to a May filing with the SEC. Arisean Capital Ltd., another firm owned by Bronfman, that month agreed to create for Debt Resolve a $500,000 line of credit with a 12 percent annual interest rate, according to the filing. The money is to be used for Debt Resolve’s debt collection subsidiary, First Performance Corp.

Burchetta said it takes 5 minutes to 11 minutes for a consumer to visit the site, log on, view his account, make a bid that the creditor accepts, and make a payment. Debt Resolve hosts and maintains the online site for credit grantors whose brand appears to site visitors. Debt Resolve has about 20 major clients including three of the largest credit card issuers, in addition to debt buyers and collection agencies, according to Burchetta. Debt Resolve charges clients a percentage of the settlement that is collected.