Credit Corp’s plan to buy assets from its struggling debt collection rival Collection House is expected to face strong scrutiny from a competition perspective, given that the transaction boosts its market share to 70 per cent.
Credit Corp Group already has a 50 per market share.
The company announced on December 24 that it had agreed to buy the Australian Purchased Debt Ledger book of the listed Collection House for $160m plus the provision of a short-term loan of $15m which is expected to be repaid within nine months.
The loan is secured against Collection House’s tax receivables.
Credit Corp said the total outlay was expected to be about $150m.
Collection House had earlier embarked on a lengthy sales process that saw a number of private equity firms such as Cerberus, Oaktree, Balbec Capital and Bain take a look.
It had been in talks with its lenders, which had been taking advice from McGrath Nicol.
Analysts from Ord Minnett said Credit Corp’s net profit of $42.3m for the six months to December, up 9.5 per cent on the same period last year, was a strong result, as it also upgraded its full year earnings guidance.
The analysts said despite the acquisition of Collection House’s PDL book, the company remained in a net cash position of $16.2m at December from $26.2m at the end of June.
The company’s debt levels have typically sat at about 40 per cent.
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