Difficult times when even the debt collectors are doing it tough

Troubled debt collector Collection House is now facing the fact that people can’t or won’t repay their obligations because of the financial impact of COVID-19.

Aug 03, 2020, updated Aug 03, 2020

The company, whose shares on the ASX have been suspended since earlier this year, said it had traded in line with expectations in the June quarter generating cash flow of $20 million. Its underlying earnings for the year were expected to be between $16 million and $18 million.

Collection House announced a review of its operating model earlier this year after clients and stakeholders said they wanted a more customer-focused approach.

Its cashflow from the purchased debt business for the quarter “was down substantially” from the previous corresponding period, but it said its payment arrangement book continued to generate a strong sustainable cash flow stream and had grown substantially during the quarter.

But it said a resumption of trading in its shares would be premature and could adversely affect its ability to successfully implement the recapitalisation process.

“The company is not aware of any reason why the suspension should not remain until at least September 30, 2020, as previously advised,” it said in a statement to the exchange.

Collection House has also met the conditions of its standstill agreement with lenders and repaid $7.6 million in recent months but is now considering potential writedowns on carrying value of its purchased debt ledger which has a current value of $297 million.

It said the economic effects of COVID-19 has impacted both the capacity and intent of customers to meet payment obligations in the company’s purchased debt business.

However, the pandemic had also generated new opportunities for the group’s contingent collection business.

It said it was continuing its recapitalisation process with the support of its existing lenders and professional advisers.

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