Consolidation in debt recovery

WELLINGTON - The debt collection business on both sides of the Tasman got a shakeup yesterday with the formation of two significant groupings.

Commonwealth Bank of Australia appointed listed Baycorp Holdings' Australian joint venture, Alliance Group, as the exclusive provider of outsourced debt management services.

CBA also took a one-third shareholding in Alliance, which was established nine months ago and was jointly owned by Baycorp and listed Australian company Data Advantage Group.

Baycorp managing director Keith McLaughlin said Baycorp, Data Advantage and CBA would now have equal joint ownership of Alliance Group.

In a separate move, Receivables Management Group (RMG) bought four companies and appointed two people to its board on the eve of its listing on the Australian and New Zealand stock exchanges.

The companies are Western Australia-based debt recovery agency Laurens and Munns, New Zealand-based Kiwi Factors, Northern Receivables and Southern Receivables, and Melbourne-based Total Credit Management Services.

RMG chief executive Paul Cooney said the companies were bought for a total of $A4.8 million ($6.15 million).

Mr McLaughlin said CBA's desire to use Alliance and take an equity stake in it was a big vote of confidence in both Alliance and in Baycorp's strategy in Australasia.

CBA, with a market capitalisation of $A24.3 billion, is the second largest bank on the Australian Stock Exchange.

It recently announced a merger with Colonial, and owns 75 per cent of ASB in New Zealand.

One of Australia's largest credit providers, CBA has 7.7 million customers - some 40 per cent of the Australian adult population and more than 60 per cent of the youth market has a financial relationship with the bank.

Mr McLaughlin said CBA's involvement with Alliance Group was "indicative of the path being followed by leaders in debt management servicing."

He said Alliance had already secured major contracts with Telstra and six other telecommunications service providers, and had a significant impact on the market.

"CBA's decisions reflect its view that outsourcing debt management services to Alliance will provide new efficiencies, and competitive gains.

"While CBA will use Alliance exclusively, it will also welcome other financial institutions, including directly competing banks accessing Alliance debt management services."

Mr McLaughlin said CBA's purchase of a one-third equity stake in Alliance would have no material effect on the balance sheet for Baycorp.

"Baycorp and Data Advantage are building Alliance Group," he said.

"These transactions are not about instant windfall rewards, but positioning Alliance and Baycorp for long-term sustainable growth.

"Alliance was established to enable Baycorp to participate in the provision of integrated debt management services throughout Australasia.

"By endorsing our business model and approach, CBA, as a blue-chip Australasian company, effectively lends the support of the Australasian banking fraternity," Mr McLaughlin said.

Baycorp closed up 25c at $10.80.

Meanwhile, RMG named Melbourne-based chartered accountant Tony Hodgson as its first chairman.

He is a joint founding partner of Ferrier Hodgson, Australia's largest specialist corporate recovery and insolvency management group.

Commercial lawyer and company director Robin Clements had been appointed non-executive director.

Receivables Management Group was formed through a reverse takeover of Frontier Petroleum and has links to Auckland entrepreneur Eric Watson.

The Melbourne company has raised $A25 million in capital in Australia and New Zealand to fund the purchase of the 10 Australian and six New Zealand businesses that have merged to form the new entity.

Mr Cooney said initial market capitalisation of RMG was expected to be $A120 million.

He said gross revenue for the combined Australian and New Zealand receivables markets was estimated to be $A280 million, but was expected to reach as much as $A500 million within two years.

Receivables Management Group had forecast turnover of $A57.5 million in the June 2001 year, with earnings before interest and tax for the same period predicted to be $A10.9 million.

- NZPA