5-Star Stocks Poised to Pop: Portfolio Recovery

• Report this Comment On October 26, 2012, at 3:53 PM, MMCapitalMgmt wrote:

  Unfortunately, you missed the pop for PRAA. It could still go higher as the valuation is still appealing, but your call was about 6 months late.

• Report this Comment On November 05, 2012, at 10:28 AM, FREDY1234 wrote:

  5 Nov 2012

  The World’s largest Debt Purchase Company - The Portfolio Recovery Associates -UK Disaster Transaction in the UK.

  PRA (PRAA http://finance.yahoo.com/q?s=PRAA) bought Mackenzie Hall for $50m Jan 2012.

  Reason for Purchase:

  1.) Increase Revenues outside US.

  2.) Platform to Purchase Debts

  3.) Mackenzie Hall one of the UK’s best performing agencies.

  4.) Use data within Mackenzie Hall’s 9 years of contingent collections to build a data room to score debt to help value potential Purchases.

  Reason for Disaster:

  1.) Loss of contingent clients.

  85% of MH Turnover was generated from ‘no collection no fee’ collections. 6 of the top 7 debt Purchases companies in the UK passed work to MH. However, within 2 months of the transaction, Cabot, Lowell, Aktiv Kapital, Arrow Global, 1st Credit and Capquest all withdrew their accounts. Moreover, Aktiv Kapital and Lowell withdrew paying cases too. This has had a devastating affect on Turnover which has been reduced by 60%.

  2.) Lowell Group.

  Lowell Financial is taking legal action against Mackenzie Hall/PRA in the UK for breach of contract. Lowell Financial http://www.lowellgroup.co.uk/ are the UK’s largest Debt Purchase Company. During 2007, Mackenzie Hall became a client of Lowell. MH signed an agreement which stated that they would not approach any Lowell clients to Purchase debt. If they did, they would be sued for damages as there would be a conflict of interest as Mackenzie Hall collected debt on behalf of Lowell. PRA have totally disregarded the agreement and have breached the agreement. Not only have Lowell withdrawn all debts from Mackenzie Hall, they have also taken paying cases too. Lowell Group is suing Mackenzie Hall for breach of contract. This has suspended Mackenzie Hall/PRA purchasing any more portfolios in the UK. Not only have PRA bought a company whose foundations we’re servicing debt purchase clients and lost them all, which has had devastating effects on Turnover, they are also restricted from buying in fear of damages claims by Lowell.

  3.) Data Room.

  Part of the success of PRA in the US is the mechanism of building their own ‘Data Room’ which supports analytics and helps score debt. However, having acquired MH, they found out that existing Service Level Agreements MH had with clients did not allow them to use such data. PRA simply didn’t do their homework when purchasing MH. Now, they have to start from scratch. So it will take between 3-5 years to gather sufficient data to challenge the existing top UK Purchasers to meaningful bids for debts.

  4.) Going in Blind.

  As they have no data, they can only bid higher than other agencies, bringing inflated prices which are not good for the UK market.

  5.) Staff

  Morale at an all time low – uncharacteristically for Mackenzie Hall. Paul Mackenzie CEO – sacked; Compliance Manager left, 3 Managers Left and 26 collectors left all within a 2 month period. Staff fears major redundancies.

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