2. Yield: opportunities in the Australian debt collection sectorCredit Corp, a debt collection company with operations in Australia and the US, looks relatively attractive across the Sage yield sector. The experience of the GFC highlights that debt collection companies do well immediately following a recession as banks sell off high volumes of bad debts, creating a buyer’s market for companies like Credit Corp. Indeed, Credit Corp’s strongest returns on invested capital came in 2009-11.This opportunity couldn’t have come at a better time for Credit Corp. The business has net cash and has plenty of capital to deploy. Its Australian competitors, such as Collection House, Pioneer Credit and Panthera Finance are all in trouble. Even before the crisis hit, they were all over-geared. Indeed, in the last 12 months both Pioneer and Collection House have been in a trading halt pending debt restructuring discussions with creditors. These peers make up more than 50% of the Australian debt collection market. To satisfy their creditors, peers adopted aggressive collection practices, which has led to increased customer complaints and angered major debt sellers. This environment has shifted seller preferences towards Credit Corp. There is a lot to like about this business.
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