Portfolio Recovery Associates Inc., a debt purchaser that mostly buys and collects delinquent credit card portfolios, recovered a company record of $85 million in cash collections during the second quarter ended June 30, up 31.6% from $64.6 million during the same period a year ago. The Norfolk, Va.-based company acquired 58 portfolios from 21 different sellers during the quarter, spending $71.1 million. About 95% of the quarter's purchase volume, in terms of dollars invested, included a combination of Visa, MasterCard and private-label credit card asset classes, Steven Fredrickson, Portfolio Recovery president and CEO, said yesterday during a conference call with analysts. The remainder came from pools of medical, utility and installment-loan accounts. Total revenue during the quarter increased 16.1%, to $63.6 million from $54.8 million in the second quarter of 2007. The company reported net income of $11.4 million, down 12.3% from $13 million. "Our intent is to continue to aggressively pursue charged-off debt in what we view as an attractive, albeit complicated, market. We have significant cash flow and available financing to accomplish this," said Fredrickson, adding that the company has no desire to lead the market in terms of pricing. "Our bid-success rate remains low and in historical ranges, which tells us we have plenty of rational and healthy competitors since pricing appears to be at more-reasonable levels than we have seen in some time." Anecdotal evidence from debt brokers and buyers suggests prices for credit card charge-offs are down to an estimated 7 cents to 9 cents on the dollar from highs of 12 cents and above seen during much of 2005 through 2007. "We spend a great deal of time modeling various buying and capital scenarios to be ready for whatever attractive buying opportunities may come our way," Fredrickson said. "The bad-debt sale and purchase market is dynamic and is driven by a number of variables that are extremely difficult to predict, including seller strategies, capital needs and charge-off volumes. On these topics, we do not have a clearer crystal ball than the next guy."
Authoritative analysis and perspective for every segment of the payments industry
Authoritative analysis and perspective for every segment of the industry
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