Wednesday, 3 May 2017

UK's biggest debt collector picks banks for £1bn flotation

The owners of Britain's biggest debt collector have hired a trio of investment banks to oversee a London flotation that will value the company at nearly £1bn.
Sky News has learnt that Goldman Sachs, Jefferies and Morgan Stanley have been hired by shareholders in Cabot Credit Management, which owns brands such as Cabot Financial and Apex.

An initial public offering of Cabot would make the company the latest UK-based debt collection group to go public, following the listing of Arrow Global in 2013.

Cabot is majority-owned by Encore Capital Group, a speciality finance company which is listed on New York's Nasdaq stock exchange.

Confirming a report by Sky News in February that it was exploring a flotation of Cabot, the company said it could take place by the end of the year.

"Since we purchased Cabot with our partner JC Flowers, we believe Cabot's equity value has grown through operational improvement, market consolidation and expansion into other European countries.

"We are in the very early stages of the IPO process, but we believe that it could be completed as early as the back end of 2017," said Encore's president and chief executive, Kenneth Vecchione.

Analysts have said that valuing Cabot precisely is challenging based on information filed at Companies House, although public disclosures show that earnings before interest, tax, depreciation and amortisation in the nine months ending September 2016 rose 24% to £180m.

In the debt portfolios it manages, the company estimates £2.1bn of remaining collections over the next decade.
Cabot, which also owns the debt collection agency DLC and Mortimer Clarke Solicitors, has built its UK business by acquiring assets from banks which have been seeking to meet increasingly onerous regulatory capital targets.

The company also operates in markets such as Ireland and Spain.

It says it has invested close to £2bn in buying portfolios with a face value of more than £20bn, and manages roughly £1bn on behalf of clients.

If it does pursue a London listing, Cabot is likely to be among the largest companies to do so this year amid a relative dearth of new flotations.

Its shareholders are said to have been buoyed by the performance of Arrow's shares, which have risen by more than 40% over the last 12 months.

Last year, Cabot was the first credit management service provider to secure full authorisation from the City regulator following a change in the supervisory regime.

Its other competitors include Lowell GFKL Group, which is backed by the private equity firm Permira and the Ontario Teachers' Pension Plan.

Cabot's board members include Peter Crook, the chief executive of Provident Financial, the listed consumer finance business.

SKY      News.