A company that has been in news for creating value for global creditors is Portfolio Recovery Associates, Inc. (PRAA). The closure of the acquisitions of Norway-based Aktiv Kapital AS and Individual Voluntary Arrangements (:IVA) Master Servicing Platform is helping the company in this respect. Following these developments, the stock price increased 5.56% in the last trading session to close at $60.00.
Portfolio Recovery Associates had announced plans to acquire Aktiv Kapital in Feb 2014, whereby it stated the total purchase consideration to be $1.3 billion. This included an equity interest of $880 million and $435 million worth of corporate debt. To complete the transaction, Portfolio Recovery utilized its cash, $170 million of seller financing, $435 million of the company’s revolving credit facility and a $214 million accordion feature on its credit facility. With the closure of this deal, Aktiv Kapital will be integrated to PRA Group – the business entity of Portfolio Recovery.
As per agreement, Aktiv Kapital will retain its name in Europe and Canada while customers in the U.S. and U.K. will interact with PRA Group. Meanwhile, Portfolio Recovery will retain its contingency collection services to its existing U.K. clients in the financial services, retail, telecom and utility industries.
Coming to the other transaction, Portfolio Recovery entered into an agreement to acquire the IVA Platform and other operating assets from Pamplona Capital Management, LLP (PCM) in Feb 2014. As decided earlier, Portfolio Recovery has appointed PCM’s Andrew Berardi as Managing Director of UK, Insolvency Investment Services, PRA Group (the new name for global Bankruptcy Services business of Portfolio Recovery).
The aforementioned transactions will take forward Portfolio Recovery’s international growth objectives. The first takeover will enable the company to become one of the major acquirers of consumer debt with around $4.6 billion in estimated remaining collections from customers.
The acquisition is also expected to help the company meet its return on equity (:ROE) goal of 20% and earnings per share (EPS) growth of 15%, going ahead. The second transaction on the other hand will strengthen Portfolio Recovery’s foothold in the U.K., thereby helping it to acquire more consumer debts. While Portfolio Recovery’s U.S. operations’ contribution to bottom-line results is commendable, the acquisition of IVA Platform will now help the U.K. insolvency business to contribute significantly as well.
Currently, Portfolio Recovery has a Zacks Rank #3 (Hold). However, better-ranked stocks in the financial services space include Apollo Residential Mortgage, Inc. (AMTG), ORIX Corp. (IX) and American Express Co. (AXP). While Apollo Residential and ORIX sport a Zacks Rank #1 (Strong Buy), American Express has a Zacks Rank #2 (Buy).