Debt collector Credit Clear to push ahead with IPO amid market volatility

Billionaire Alex Waislitz says it’s ‘the most challenging, difficult and unpredictable periods of investment’ he’s faced in 30 years.

In a briefing for his Thorney Group’s two listed investment companies on Wednesday, Alex Waislitz (pictured here last November) discussed the COVID-19 pandemic and the massive government stimulus measures. Picture: David Geraghty

Debt collection firm Credit Clear is in the advanced stages of preparing a float on the ASX, despite one of its investors, billionaire Alex Waislitz, describing the current market situation as “the most challenging, difficult and unpredictable periods of investment” he has faced in his 30 year career.

Credit Clear chairman Gerd Schenkel, a former NAB and Tyro Payments executive, said the company was planning to hit the ASX boards towards the end of the year.

The float is expected to raise fresh capital of up to $10m following the recent $9m private raising, which Mr Waislitz participated in. The latter raising was used to buy Credit Solutions, which has debt-collection contracts with a large number of Top 50 Australian companies, including Transurban, AGL, South East Water, Beyond Bank and Toyota Financial Services.

“We are in advanced stages of preparation and the majority of funds raised will be invested in the technology roadmap and the acceleration thereof,” Mr Schenkel said.

“We are a technology company, so beyond collections we see many other applications in large markets. For example, general bill collection and payments, which is effectively the same functionality, just that the collection process would happen prior to the due date.

“We are now cross selling the full range of collection services with a focus on the digital components and we are preparing for an IPO, primarily because we think the time is right for us to further invest in the platform.”

The IPO comes at a turbulent time in markets and for debt collectors. While debt collection activity has increased during the COVID-19 pandemic, some people have no capacity to pay those debts after their incomes evaporated, while lockdowns in the Philippines and India shut down entire offshore debt collection operations.

This week rival debt collector Credit Corp Group warned of a $65m profit hit after the coronavirus economic downturn smashed repayments. It said it expected to incur a 13.5 per cent reduction in the carrying value of existing debt ledgers.

Mr Schenkel said some of its clients, particularly government departments, had also put off calling in the debt collectors in an effort to “do the right thing by citizens”.

“While the economic situation we are in is generally positive for us in terms of more collection activities, there were some delays in the activity that we are now catching up on. The delays were driven by two things.

“Firstly, especially small government departments wanted to do the right thing by citizens and move these collections in a deferred manner.

“And the second one was the collection departments that had outsourced or offshored their operations really lost their operations overnight in the Philippines and India. So they needed a bit of time to build the onshore operations.”

Mr Schenkel said this created an opportunity for Credit Clear, which was able to convince more of its clients to switch to its digital platform.

The company started as a smart messaging platform that was initially used for debt collections and bill collections. It then evolved to full service debt collection after it acquired Credit Solutions.

Winning contracts

Mr Schenkel said it remained a technology company at its core, and in the past eight months had won 18 of the 20 competitive contracts it had participated in.

“The platform is effectively using the data we have in consumer behaviour and other inputs to determine what messages to send to whom and at what time.

“Because by regulation we are only able to send a limited number of messages in the collection space, it’s very important that we don’t squander the scarce resource of contacting consumers and make it as effective as possible.

“So that outcome for our customers, which are the big billers, is a dramatically reduced cost in collections but roughly the same effectiveness as you would expect from phone calls and letters.”

Credit Clear is largely backed by billionaire Paul Little. He supported the recent $9m capital raising, which was led by Alex Waislitz’s Thorney Investment Group. Monadelphous chairman John Rubino and Melbourne IVF founder John McBain also supported the raising.

In a briefing for his Thorney Group’s two listed investment companies on Wednesday, Mr Waislitz said the conflicting situations across the world created by the COVID-19 pandemic and the massive government stimulus measures it has generated “make the unpredictability of the markets quite profound”.

The Thorney-backed Thorney Opportunities Group (TOP) is currently trading at a 23 per cent discount to its net tangible assets at June 30, which Mr Waislitz described as “disappointing”, but he said ”value and turnaround stocks will come back in favour at some point in time and when they do we believe we will significantly outperform.”

“If they don’t, we believe M&A activity will bring out some of that value,’’ he said, pointing to the current takeover offer from financial services group IRESS for a TOP portfolio company OneVue.

“Turnarounds often cost a bit more to achieve and they need to raise capital ... But eventually they can, with the right management, achieve outstanding results as we have seen with companies like (TOP portfolio companies) ServiceStream and Money3.”