Joewolf I suspect that the quality of PDLs bought by both CCP...

Joewolf

I suspect that the quality of PDLs bought by both CCP and CLH are substantially similar, so initially the two companies would buy and value separate, but similar, parcels of PDLs at a common Balance Sheet valuation. However, if both collect what they paid for the PDLs within a common time span (say, 14 months), the value in their respective Balance Sheets would be different then, because CCP amortises PDLs by a higher percentage of the collections. I know that I am repeating what I have written before, but I want to ensure that investors understand that difference between the two companies.

On the matter of CCPs debt leverage, judging the wisdom thereof is not a simple matter of having a more-debt-bad-no-debt-good mantra. One must understand that CCP has a wealth of analytics that informs the executives with a high degree of statistical accuracy what they can expect from investments in PDLs in terms of time (up to six years) relative to collection effort. There are times when PDLs become expensive, and if CCP considers that investing in them would not meet its performance targets, it holds back from buying PDLs. The lack of fresh PDLs to collect may mean that more collection resources should be switched to older PDLs, and even if the collection rate per collection hour drops, this is compensated for by the fact that older PDLs have been substantially amortised. Also, in times of tight PDL supply, CCP has the option to divert money not invested in PDLs to expanding its Loan Book. Rather than building a cash buffer to handle good PDL-buying spurts, the company returns money it cannot profitably deploy to debtors and shareholders, and it later relies on its excellent banking facilities to buy up big when PDLs become available at good prices during certain windows of time. We shareholders should have the confidence in CCP's management to allow them to do that.

Knowing when to buy PDLs, and when to hold back, when to focus collections on fresh paper, and when to focus more on collecting on older debts is the name of the game. I think there is a song skulking in those words!