Ann: FY2020 Unaudited results update, page-18

So they impaired and provided extra expense circa $65m, which is more than I expected. However, the comment that it is fresh PDLs that required impairment, confirms that the effective PDL amortisation of circa 47% has saved the day in respect of older PDLs. With competitors, the older PDLs were over-valued before Covid-19 hit the fan.

On the new PDLs, CCP would have priced them on the basis of ante-Covid expectations of how quickly it could convert an expected percentage to agreed repayment plans. CCP is a very conservative company, so my expectation is that they have significantly impaired fresh PDLs in the light of the retarded sign-up to repayment plans, and as the number of debtors who agree to repayment plans increases, the company will in effect wind that over-impairment back. We will not see reversals coming in as credits, but we may well see PDL revaluations as credits to the revenue, because that is how the current accounting model works.

The future price for new PDLs will match commitment-to-repayment-plans expectation. Basically, the purpose of the capital raising was to invest in Australasia, and except for one small PDL supplier, new prices are in place. CCP is a very mechanistic business, the price paid for PDLs is determined by the collection expectations, and the weak position of competitors in Australasia is that the likes of CLH and PNC are not going to be able to bid up the price of PDLs

Mr Market may not appreciate the above, so it could be a long haul before the SP gets back to a realistic level, IMO. I was hoping for something better, but at least now one huge unknown is behind us, that is the quantum of the impairment. Relatively speaking, it seems that CCP has impaired more than Enron Capital and Intrum has impaired, who are two firms I used to attempt to get a feel for what CCP's impairment would be. I suspect that the before-mentioned duo have under-impaired, and CCP has over-impaired. I need to give this more thought, as this is just an off-the-top-of-my-head post.