OSI Emerges from Chapter 11 with Credit Facility from Merrill Lynch to Support Portfolio Purchasing

St. Louis, MO – Outsourcing Solutions Inc. (OSI) announced today that it has emerged from Chapter 11 with a strong balance sheet and strategic plan for long-term growth. The company’s growth plan includes a new multi-year, $90 million credit facility from Merrill Lynch for the purchase of portfolios of charged-off receivables, also effective today.

“The fact that we were able to move through the Chapter 11 process in less than seven months is truly an accomplishment,” said Kevin T. Keleghan, president and CEO. “We emerge with the strongest balance sheet in our history and the resources to further develop our position as a leading provider of business process outsourcing services across the credit-to-cash cycle. I could not be more optimistic or excited about the future of this company.”

The $90 million credit facility with Merrill Lynch is an important part of that future, Keleghan said. “It positions OSI as one of the leading portfolio purchasers in the United States. This agreement, combined with our extensive portfolio expertise, re-establishes us as a major player in this industry and gives us great potential for additional growth.”

OSI’s Chapter 11 plan of reorganization was formally confirmed on Oct. 15, 2003, by the U.S. Bankruptcy Judge Barry Schermer. As previously announced, under the terms of the plan of reorganization, OSI emerges with a strong balance sheet, including long-term debt of approximately $175 million, compared with $600 million in debt at the time of the Chapter 11 filing in May.

OSI’s secured creditors will receive approximately 69 percent of the reorganized company’s fully diluted common stock. The company’s former Senior Subordinated Noteholders and certain other unsecured creditors will receive pro rata portions of $500,000 cash and approximately 5 percent of the reorganized company’s common stock. The company’s management will hold 7.5 percent of the common stock of the reorganized company. In addition, Madison Dearborn Partners (MDP), one of the largest private equity firms in the U.S., will receive shares convertible into approximately 18.5 percent of the reorganized company’s common stock in return for MDP’s arrangement of the Merrill Lynch facility and a new capital investment of $10 million.

“Our new investment in OSI reflects our belief that the company’s restructured balance sheet, strong operations, excellent management team, and industry leadership position it for significant growth,” said Paul Wood, managing director of Madison Dearborn Partners. “In particular, OSI now has the financial strength to realize the growth potential of its strategic array of receivables management services. And we believe its re-entry into the portfolio purchasing business through its agreement with Merrill Lynch is an important element of that growth potential.”

Keleghan said he sees a broad range of growth opportunities for the company. “OSI has strengthened itself financially and operationally. Over the last several years, we’ve built a capability to offer receivables management services that go far beyond just late-stage bill collection. Today, we cover the entire credit-to-cash cycle and focus on providing early-stage services – helping clients welcome their new customers, handling billing, and managing the customer relationship – which decrease the need for late-stage collections.

“Looking ahead, in addition to our renewed portfolio purchasing capabilities, we expect to build on our solid foundation by maximizing specific opportunities in the bank card, healthcare, and government sectors among others; increasing focus on meeting the demands of small- and mid-size businesses; and further expanding our suite of early-stage services.”

OSI is a leading business process outsourcing (BPO) firm providing receivables management services, which link a company’s cash flow objectives with credit management policies from beginning to end of the credit-to-cash cycle. By improving the revenue cycle, OSI enhances the financial performance of America’s leading companies, as well as government entities, healthcare providers, educational institutions, and other credit grantors. With industry-specific strategies and services, OSI delivers results that improve the bottom line through accelerated cash flow, lower operating costs, reduced bad debt expense, and improved customer retention. St. Louis-based OSI provides receivables management outsourcing to a blue-chip roster of Fortune 500 clients. For more information about OSI, visit www.osioutsourcing.com.