I notice that nobody has commented on my repeated requests for views on how CCP derives PDL Amortisation. I am fairly sure that what CCP does is to debit the purchase of tranches of PDLs to the PDL Asset account, which is probably a control account representing a ledger of individual tranches of PDLs. This value is amortised over six years at a rate that reconciles to what CCP expects to collect over six years.
If the expected pattern of collections varies from reality to a material degree, CCP may adjust the the amortisation rate. Because CCP deals in large numbers of debtors, the mathematics of large numbers, plus superb analytics, combine to make the original assessments of collections accurate. It would not make a huge difference even if the variance from reality were material, because over six years each tranche of PDLs would be fully amortised.
The gap between “collections” and PDL Amortisation is referred to as the Interest on PDls, or some such name. If collections exceed original expectations, or vice versa, the difference simply increases, or decreases, the Interest on PDLs.
The crucial point is that Profit before Tax is not affected by PDL valuations, and the asset value of PDLs would tend to be accurate.
I do not hold CLH, but it seems that its accounting for PDLs is fairly similar, but: a) I cannot explain why its average ration of Amortisation to Collections is a little lower than it is for CCP; b) I do not know the number of years that it sets to fully amortise PDLs: and c) I do not know how the selling of its forward collections affects the accounting treatment.
I also do not hold PNC, so I have not invested time in attempting to understand how it derives its Profit before Tax, which leaves me with the suspicion that it may include the up-valutation of the PDL assets. Also, it writes off its PDLs over ten years, compared to CCP's six years.
In summary, I am inclined to moot that CCP is not inferior to CLH and PNC in the analytical ability to buy PDLs at the right price, convert a high percentage of these to agreed payment arrangements, and in collecting the money, and so CCPs relatively high ratio of PDL Amortisation to Collections makes me more comfortable holding CCP than the other two companies. That CCP can elect to deploy funds in to Aus/NZ PDLs, USA PDLs, or Aus/NZ unsecured debt is an additional plus.
PS for James RR.
On scaleback, have no idea, but I think it may be zero, because it would make little difference if CCP raised $10m or twice as much. CCP took up more than planned from the Institutional Placement.
On stressing out, I hold other shares. CCP is 23% of my total holdings by current value, but probably about 10% by funds invested. I have a low propensity to spend, and I turn 78 today, so I have a high tolerance of risk (shrouds don't have pockets). The share market for me is more a hobby than anything else. I should look for a new company in which to invest, and sell some of the dogs that I have held for years.
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