Debt Collection Giant Slashes Borrowing Costs
The buoyant state of the City's financing markets will be underlined this week by a transaction involving one of Britain's leading debt collection agencies.
Sky News understands that Lowell Group, which is owned by the private equity firm TDR Capital, is to unveil a deal that will slash the cost of its own borrowings.
Goldman Sachs and JP Morgan, the Wall Street investment banks hired to work on the deal, are understood to be planning to sell a new bond to investors with a yield of approximately 6%.
That will compare with Lowell's existing arrangements, which pay interest of more than 10%, underlining the more benign state of debt markets since the company's most recent bond issue towards the end of 2010.
A source close to the company said information sent to prospective bond investors would say that the proceeds - expected to be in the region of £100m - would be used for "general corporate purposes".
This is likely to involve pursuing further acquisitions of consumer debt portfolios although it could also give TDR the flexibility to pay itself a small dividend if such purchases did not prove to be attractive, they said.
Lowell, which was acquired by TDR in September 2011, says it is "committed to taking a fair, sensitive and ethical approach to debt recovery, and is in full compliance with UK Government guidelines and industry trade and regulatory bodies".
On Thursday, the Financial Conduct Authority set out its final rules for regulating the consumer credit industry amid criticism about the behaviour of some debt collection agencies.
Lowell's divisions include Red Debt Collection Services, a specialist debt recovery department which focuses on telecoms accounts and so-called escalated accounts - or those which relate to persistent non-payers.
A source close to the group said that Lowell could decide to pursue a stock market listing towards the end of this year or the beginning of 2015.
When it does examine a listing, sources close to Lowell believe it is likely to be valued at more than £1bn based on the rating attributed to rival Arrow Global, which floated last year and now has a market capitalisation of just over £450m.
"It is a higher-quality business than Arrow so it should command a premium to Arrow's rating if it goes public," an analyst said on Sunday.
The debt collection sector has also seen a substantial amount of other corporate activity.
Earlier this month, Cabot Credit Management, which is jointly-owned by the US debt recovery group Encore and New York-based buyout firm JC Flowers, bought Marlin Financial and its £2bn-worth of loans for £295m including debt.
TDR declined to comment.
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