Collection House is believed to be in talks with its lenders as it remains in a trading halt since Friday in what appears to be the latest debt collection agency battling for survival.
Banks including CBA and Westpac are among the lenders that have loans with the Brisbane-based group. Collection House had $210.6m in net debt as at June 30.
Apparently the company’s trading halt is thought to relate not only to questions about whether it has the support of its lenders, but also whether the value of its balance sheet debt has been overstated.
For the 2019 financial year it generated $38.1m in earnings before interest and tax and its net profit was $30.7m, up 17.5 per cent on the previous corresponding period. Its market value is now $154m.
The debt collection industry appears to have fallen out of favour with lenders as it now remains at the mercy of far tougher regulation.
Another business, Panthera, is believed to be in the market trying to raise money.
Only last year Collection House’s listed rival Pioneer Credit saw The Carlyle Group gain control of the business by acquiring the debt for $130m, outbidding its listed rival Credit Corp.
Before that sale took place, the company was suspended from trading for some time, and distressed debt funds were circling.
Commonwealth Bank and Westpac were also senior lenders but Pioneer Credit had defaulted on its loans.
Meanwhile, shares in Speedcast are still not trading as it is said to be struggling in attempts to find a party to back an equity raising.
The idea is that the company announces some positive news in the form of an equity raising with its results, but finding parties prepared to put money into the business has so far been difficult.
It has already signalled that its annual earnings would be about 10 per cent less than original guidance.
Lenders are trading debt in the company at about 70c to the dollar, according to sources in the market, after the business last year came close to breaching its covenants.
The remote communications and IT services provider is believed to owe about $US600m in Term Loan B loans to banks including Macquarie, Credit Suisse, Citi and ING, along with others. The company also has a $100m revolving credit facility and now the expectation is that Speedcast will sell assets, with some betting that its marine division will shortly be placed on the block.
No doubt the market will be eagerly awaiting news on the company when it reports its results on February 27.
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