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Transcript
The Purchase and Sale of Performing Accounts Receivables
November 17, 2015
Scott Coffin, President
Canaccede Financial Group
170 University Avenue, Suite 901
Toronto, ON
M5H 3B3
Phone: 905.466.6655
[email protected]
Agenda
1. Canaccede Financial Group - Corporate Profile
2. Varde Partners – Corporate Profile
3. What is a Performing Receivable?
4. Performing Assets - Trade Market
5. Performing versus Non-Performing Receivables
6. Why sell Performing Receivables?
7. Customer Experience – The Nurse
Corporate Profile
Canaccede Financial Group (CFG)
CFG operates two separate businesses. Canaccede
Investments, founded in 2008, specializes in the acquisition of
consumer receivables portfolios from Canadian financial
institutions. Canaccede Investments acquires consumer
accounts across the credit spectrum, ranging from insolvency
and distressed debt portfolios through performing loan and
credit card accounts.
Affirm Financial, founded in 2010, is a consumer finance
company providing term loan and credit card solutions to
Canadian consumers who do not qualify for prime sources of
credit.
Varde Partners acquired a majority interest in CFG in the first
quarter of 2015
Corporate Profile
Värde Partners is a global investment adviser focused on credit and value
investing strategies
February 2015 - Värde Partners and Canaccede Financial Group Ltd.
(“Canaccede”) announced that Värde has entered into a purchase agreement
to acquire a 51% majority equity stake in Canaccede. As part of the
transaction, Värde has also committed up to an additional C$275 million of
financing to grow Affirm Financial Services, Inc., Canaccede’s non-prime
consumer lending business in Canada.
March 2015 - Värde Partners a global alternative investment firm, KKR, a
leading global investment firm, and Deutsche Bank have signed an agreement
for the purchase of GE Capital’s Australia and New Zealand Consumer Lending
Business at an enterprise value of A$8.2 billion.
What is a Performing Receivable?
• Performing Receivables are loans or credit cards where the consumer is
either making all of their payments as agreed or in a delinquent
condition, prior to charge off.
• Various products:
• Active Credit Card
• Liquidating Credit Card
• Line of Credit
• Term Loan
• Auto Loan
• 1st and 2nd mortgages
• Retail Credit Revolvers
• Retail Special Plan Programs
• Student Credit Portfolios
• They can be transacted in various ways:
• Entire portfolio sales
• Specific customer type or delinquency cycle
Performing Assets - Trade Market
Two distinct markets that drive performing asset trade
activity in Canada.
1. Prime Bank Consolidation Market – e.g. October announcement by
Scotiabank of its agreement to buy the Canadian credit card
business of JPMorgan & Chase.
• Provide effective solution for Customers within these portfolios
that do not meet the minimum credit standards of the acquirer
- providing either buy side or sell side support.
2. Non-prime Market – market is predominantly driven by Financial
Buyers and Strategic Buyers.
• CFG is an active participant in this segment of the market
having acquired in excess of 50,000 performing credit accounts
in the private label, bank card and term loan product types.
Performing vs Non-Performing Receivables
Non-Performing Receivable
Operating
Requirements
•
•
•
•
•
•
Collections and Recovery Strategy
Multiple outsourcing options available
No requirement for monthly statements
PAP’s not necessary
Small percentage of RPC’s established
High payment / PIF objective
Performing Receivable
•
•
•
•
•
•
•
•
Regulatory and
Compliance
•
Limited to provincial specific collections
regulatory requirements
•
•
Account Management and Delinquency
Curing Strategy
Outsourcing – few options
Monthly statements required
PAP required
Harmonization to originator terms and
conditions dates required
Interest rate accrual precision required
High RPC’s established
Low / pre-set payments necessary
OSFI, PIPEDA & PCI Certification Required
for Credit Card Product
Complex regulatory, compliance and audit
procedures required
Resolution
Objective
•
•
PIF to SIF
Liquidating Objective
•
•
Create a Customer relationship
Fast liquidation is not the objective
Return Profile
•
High hurdle rate requirements due to high
COF from financing sources
•
Lower hurdle rate expectations
necessitating lower COF sources
Why sell Performing Receivables?
• Maximizing Return
 Selling receivables earlier in their delinquency when charge-off
probability is high yields a better price than selling the same
receivable post charge-off.
 Selling higher risk assets (generally, Customers who have a FICO
Score <675) from portfolios enables FI’s to de-risk remaining
portfolios and allow for lower provision of capital against the core
assets. This yields an enhancement of ROI and ROC for the most
profitable segment of a portfolio.
• Exiting non-strategic business lines or non-strategic customer
relationships:
 Specific non-core products or industries that are no longer deemed
core for growth strategy.
 Undesirable geographies or regions where resources are thin and
account management is difficult.
Customer Experience
• Enhancing the Customer Experience
 Customers for whom the bank has made a strategic decision to
liquidate will be able to work with a long-term strategic partner who
will not take a “liquidate first” approach to their account.
 Partnering with a non-bank financial services company, who are not
constrained by strict OSFI or OCC directives, can yield improved
experience for the Customer.
Customer Experience Example
A senior executive of a major credit card issuer shared the experience
of a long term customer who injured herself at work. Recognizing she
would be living on reduced income during the period of medical leave
she contacted the issuer and made alternative arrangements during the
period of her convalescence.
Upon being cleared to return to work, she needed relief from one
month’s payment before resuming work to pay professional fees. This
resulted in a break of revised terms and necessitated charge off –
despite being able to resume her full monthly payments the following
month.
Thank you!
Questions?