Subiaco-based debt collectors Repcol Ltd has acquired debt purchasing company, Javelin SPV1 Pty Ltd, for $800,000.
Subiaco-based debt collectors Repcol Ltd has acquired debt purchasing company, Javelin SPV1 Pty Ltd, for $800,000.
Javelin purchases portfolios of distressed debts which have been rehabilitated to the point where repayment arrangements have been put in place with the debtor. Javelin currently owns portfolios of this type with a face value of $47 million which have yielded collections of approximately $14.5 million this financial year.
Repcol has previously sold debts under arrangement to Javelin and was engaged by Javelin to collect this debt for a commission. Repcol was also entitled to a bonus commission once sufficient debt had been collected to enabIe Javelin to settle its liabilities to investors and loan providers.
The cost of the shares and the payout of Javelin's liabilities have been funded with bank debt which will increase Repcol's overall gearing to approximately 30%, and reduce its weighted average cost of capital. The acquisition will be cash flow positive to Repcol immediately as repayments of the bank debt will be lower than the funds Repcol will receive from Javelin debt collections.
Repcol's Managing Director, John Wreford said in a statement to the stock exchange that the acquisition of Javelin would enable Repcol to provide greater transparency with respect to the value of its bonus commission entitlement, while also improving capital management by increasing gearing, improving cash flow and lowering Repcol's weighted average cost of capital.
After securing Repcol expects to report a profit after tax for the 2006 financial year moderately above that reported in the previous year. Whilst the acquisition of Javelin has brought forward the recognition of the bonus commission, the result for the year has been impacted by restructuring costs in India, higher payroll costs from a strengthened middle and executive management team, expenditure on technology infrastructure and higher borrowing costs associated with convertible notes issued.