Credit Corp plucks Collection House out of administration via $11m acquisition

Credit Corp plucks Collection House out of administration via $11m acquisition

Debt buyer Credit Corp Group (ASX: CCP) has announced it will acquire all of the shares in beleaguered debt collector Collection House (ASX: CLH) for $11 million, enabling the continued operation of the target which is currently under administration.

Announced today, CCP says the acquisition will significantly increase the scale of its services and activities in Australia and New Zealand, and will more than double Credit Corp’s debt collection revenues.

While CCP and the administrators of CLH have agreed upon the deal, it still requires creditor approval which will be sought at a meeting in the coming two weeks, as well as Australian Securities and Investments Commission (ASIC) giving the deal its blessing.

Collection House fell into administration on 30 June, after it languished for two years in COVID-induced doldrums and struggled with a weak national economic situation.

In addition, the company’s debt facility with now-collapsed Volt Bank, secured against CLH’s substantial investment in the neobank, may have been the debt collectors undoing. One day before CLH appointed administrators Volt announced it was returning its banking licence and asked all users to withdraw their funds.

Soon after CLH fell into administration, FTI Consulting announced the company was in the hole for nearly $20 million to creditors, with Westpac Banking Corporation (ASX: WBC) facing the biggest exposure to the firm.

Alongside Westpac, Commonwealth Bank of Australia (ASX: CBA) has a debt of $1.97 million, and a further 96 unsecured creditors are owed a total of $5.63 million, in addition to $1 million in debts on the personal property securities register.

The firm’s appointment of administrators also led to class action law firm Bannister Law announcing it was investigating Volt Bank’s collapse and the events leading up to 30 June.

Credit Corp CEO Thomas Beregi says that his company will build on CLH’s business, noting the longevity of many client relationships.

“The transition will be seamless and Credit Corp will maintain the high service levels provided by Collection House over many years,” Beregi says.

“Long-standing clients will benefit from the certainty of a secure financial structure and the capacity to invest in enhanced service position over time.”

In a statement from FTI Consulting, the administrators said the proposed transaction would enable the continued operation of CLH and there would not be any employees terminated prior to the completion of the deed of company arrangement (DOCA).

“Details of the proposed transaction will be provided to creditors in the voluntary administrators’ report to creditors which will be issued in the coming week,” FTI said.

“The report will also be made available to shareholders of CLH.”

Shares in CCP are down 3.62 per cent to $19.58 per share at 11.22am AEST.

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