The Credit Corp Group Limited (ASX: CCP) share price is pushing higher today after completing its acquisition of a purchased debt ledger (PDL) from Collection House Limited (ASX: CLH).
At the time of writing, the debt collection company’s shares are up over 1% to $30.06.
The same cannot be said for the Collection House share price. Its shares have returned to trade for the first time since February 2020 and are down 66% to 44 cents this afternoon.
What is happening?
Just before Christmas, Credit Corp announced that it would acquire the Australian PDL book of Collection House for approximately $160 million. This was the largest single PDL purchase in Credit Corp’s history according to its CEO, Thomas Beregi.
Under the terms of the agreement, Collection House can receive a portion of the collected funds that Credit Corp recovers. This is on the proviso that Credit Corp achieves above the level required to have a return on its investment.
This deal was made as part of the recapitalisation process for Collection House. The proceeds from the transaction were to be immediately applied to reduce its senior debt.
After which, Collection House’s existing lenders agreed to provide a new three-year senior debt facility of approximately $45 million on commercial terms and Credit Corp has provided it with a short term loan of $15 million for general corporate purposes.
While the deal with Credit Corp is technically complete, Collection House has revealed that it received an inquiry from the Australian Competition & Consumer Commission (ACCC).
The release explains that the ACCC has made an inquiry regarding the transaction and the company has responded to it.
No further details were given, but Collection House advised that it will continue to assist the ACCC with any further inquiries.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.