Business Description

We are a specialty finance company headquartered in Norfolk, Virginia and incorporated in Delaware. Our primary business is the purchase, collection and management of nonperforming loan portfolios, and we are a global leader in the industry. Most of the loans we purchase are from credit originators who have chosen not to pursue, or have been unsuccessful in collecting, the full balance owed to them ("Core" accounts). To a lesser extent, we also purchase loans in situations where the customer is involved in a bankruptcy or similar proceeding ("Insolvency" accounts). As part of an ancillary business, we purchase and provide fee-based services for class action claims recoveries in the U.S. We are organized on a geographic basis, with our principal markets in the U.S. and Europe, where we have operations in 12 countries and the United Kingdom ("UK"). On a significantly smaller scale, we also operate in South America, Canada and Australia. Subject to globally-established parameters for capital allocation, portfolio return thresholds and leverage, each market functions under a similar debt management business model, which is predicated on purchasing nonperforming loans and generating returns through disciplined collection strategies over extended collection periods. Portfolio purchasing To identify purchasing opportunities, our investment teams continuously engage with known and potential sellers, including major banks, consumer finance companies, auto finance providers and other creditors. The types of Core and Insolvency loans we purchase include general purpose and private label credit cards, consumer loans, auto loans, overdrafts and small business loans. In valuing these loans, we consider several factors, including the type of asset, the age since charge-off, the geographic region, the sellers' selection criteria and collections activity up to the time of sale. Nonperforming loan portfolios are typically sold through formal sales processes in which bids are requested from a group of pre-qualified potential buyers. In some cases, portfolios can also be sold on an exclusive basis directly to a seller's preferred buyer. In determining the price we bid for a portfolio, we leverage our extensive data set and modeling experience, which considers various factors, including projected cash collections, the estimated cost to collect and financing costs. All of our purchases are subject to approval by the applicable internal investment committee(s). Credit originators sell nonperforming loans in either single portfolio transactions, referred to as spot sales, or through pre-arranged sales of multiple portfolios over time, referred to as forward flow sales. Under forward flows, portfolios are purchased on a periodic basis at a negotiated price over a specified term, typically ranging from six to 12 months. Forward flow agreements establish specific criteria for the loans to be purchased, and many allow for termination and/or price renegotiation should the underlying quality of the portfolio deteriorate over time. Portfolio collections Core Our Core account collection efforts are driven by a combination of internally staffed call centers and external vendors. Except for accounts placed with a third-party debt collection agency, we utilize proprietary models to proportionally direct work efforts to those customers most able and willing to pay, and ultimately, to achieve the highest correlation to profitable collections from our call activities. As part of our focus on driving cost efficiency and optimizing the performance of our U.S. business, we have reduced our onshore call center headcount and moved approximately one-third of our U.S. call center capacity offshore. An important component of our collection efforts involves legal recovery and the judicial collection of balances from customers who we believe have the ability to settle their obligations but are unwilling to pay. We do not initiate our collections activity in the legal channel, but consider using it when customers do not engage with us voluntarily. There are some markets, especially in the Nordic countries, where the collection process follows a prescribed and time-sensitive set of legal actions, but in the majority of instances, we are able to use models and analysis to identify accounts with a higher propensity to pay in legal recovery.…