Currently operating as Midland Credit Management in the United States and Cabot Credit Management in the United Kingdom, Encore announced today that it has initiated a process to combine the legally distinct balance sheets of its two primary operating units, resulting in a unified funding structure.
Company Overview:
New, Simplified Organization Chart:
Transaction Summary:
Through a global borrowing base, increased capital markets access, and a stronger, more diversified credit profile, Encore seeks to centralize and expand its borrowing capacity while also lowering its cost-of-capital ahead of the healthy and growing opportunity set awaiting the debt collection industry in the next phase of the credit cycle.
In addition, Encore provided a business trends update through the month of August, confirming the continuation of the better-than-expected collections performance realized in 2Q20 and in the month of July. Recall, last month, the company reported that global cash collections exceeded expectations by double-digits in the second quarter, with this trend continuing through the month of July. In particular, 2Q20 collections in the U.S. were +29% higher than Encore's 2Q expected collection curves, and in Europe, collections were +17% higher than expected.
In sum, we view this reorganization positively as it should help the company take advantage of the coming opportunity set later this year/early next year.
