Encore Capital Group Acquires Controlling Stake in Baycorp

Encore Capital Group announced today that it is entering into an agreement to buy 50.25 percent of Baycorp, a leading debt resolution specialist in Australia and New Zealand. The current owners, Oceania Capital Partners and SAS Trustee Corporation, have reduced their ownership levels but will remain as shareholders and directors of the company.

As the world’s largest debt purchaser, Encore employs more than 5600 people and collected more than $1.6 billion (USD) in 2014 alone. The Baycorp acquisition expands Encore’s global reach to 13 countries.

Kenneth A. Vecchione, President and Chief Executive Officer of Encore said, “Through Baycorp, we now have access to two new markets that are showing strong growth and have promising opportunities for both consolidation and diversification. Our vision is that Baycorp will be the number one or two player in Australia to complement its current leadership position in New Zealand, and we are excited to support the company in rapidly expanding its growth strategy in the region.”

 

According to the company’s announcement, there is approximately $330 million (USD) of capital deployed in the Australia market each year, which includes not only consumer debt but also the banking, energy and cable sectors. This makes it about one-third the size of the U.S. market. The country has a well-established, robust market where the banks sell debt regularly in a constructive regulatory environment, and it is estimated to grow at approximately 5 percent per year. In terms of contingency collections, the overall market size is approximately $400 million (USD).

 

In its industry, Baycorp has the largest customer default database in Australasia, with $118 million (USD) in estimated remaining collections (ERC) and nearly 60 years’ experience in resolving debt across Australia and New Zealand. The company has a vibrant debt collection business, and it is one of the preferred insource and outsource companies for the Australian government. Incorporating Encore’s best practices, as well as leveraging its India platform, will strengthen Baycorp’s competitive edge and make its offerings even more compelling to the market.

This announcement comes just a few weeks after the company reached a settlement with the Consumer Financial Protection Bureau (CFPB).  The CFPB cited both Encore and PRA Group for what it termed illegal debt collection activities, including purchasing debts they should have known were inaccurate and/or not legally enforceable and attempting to collect on that debt through unlawful means.

Encore issued a statement vigorously disagreeing with the Bureau’s characterization of its practices but said it agreed to the settlement in order to move forward.

“After rigorously and thoroughly scrutinizing seemingly countless aspects of our business for more than a year, the CFPB ultimately identified only two key issues warranting consumer refunds,” Encore’s President Kenneth Vecchione said. “While we disagree with the CFPB’s positions on these two issues, we chose to agree to a settlement so we can move forward. We also believe the CFPB is imposing yet-to-be-adopted rules to past practices. This outcome is not about current law or rules already on the books, but instead about the CFPB subjecting companies to its own interpretations that have never been codified or adopted.”

The whole industry will soon have to live by these standards and it was to Encore’s advantage to have to comply early, Vecchione insists.