Collection House seeks suitor looking for more than a loan book

The debt collection industry appears to have fallen out of favour with banks as it is now at the mercy of far tougher regulation.

Collection House and its prospective suitors are understood to have reached an impasse over negotiations for a sale of the debt collection company.

It is understood the private equity suitors that had been around the hoop only wanted to acquire the company’s loan book, which at December was valued at $337.6m.

However, this would deem the listed company’s equity as worthless, and it wanted a bidder to ascribe some value to the business. The situation has some anticipating the company is accelerating down the path of voluntary administration or receivership. If the business does go into liquidation, the loan book would be auctioned off.

No doubt, the same prospective buyers would likely line up.

Parties that have been around the hoop include Oaktree Capital and Balbec Capital, while groups like Cerberus Capital Management and Bain Capital are not thought to be involved.

US-based Balbec Capital had earlier entered into a put and call option with Collection House and has an interest in ensuring it remains afloat.

Collection House has a standstill agreement in place with its senior lenders after struggling even before the onset of the COVID-19 pandemic.

The debt collection industry appears to have fallen out of favour with banks as it is now at the mercy of far tougher regulation.

In a recent update to the market, it said its net debt was $209.4m and it had posted a $47.3m loss for the first half of 2020. The market value of Collection House was last said to be about $153m.

Commonwealth Bank and Westpac are among the lenders to the Brisbane-based group and are advised by McGrath Nicol. Flagstaff Partners has been advising the business.

Meanwhile, rival Pioneer Credit has until Friday to refinance its senior debt when a standstill agreement with its lender, The Carlyle Group, expires.

Carlyle earlier entered into a $120m takeover deal via a scheme of arrangement with Pioneer, but that deal was thrown into turmoil due to COVID-19.

When the private equity firm backed out of its takeover plan it demanded that Pioneer Credit pay back loans worth $165.8m.

This was after Carlyle acquired Pioneer’s debt.

Now Pioneer is in talks with Japanese lender Nomura to source debt for a refinancing.