March 20 -
-- We are assigning a ‘BB-’ long-term counterparty credit rating to U.K.-based finance company, Lowell Group Ltd. (Lowell, the group).
-- We are also assigning a ‘BB’ issue rating and ‘2’ recovery rating to the proposed GBP200 million senior term notes issued by Lowell’s wholly owned subsidiary, Lowell Group Financing PLC.
-- The notes have a seven-year maturity, and we understand that the group will use them to repay existing senior debt and a shareholder loan and to make an equity distribution.
-- The stable outlook on Lowell reflects our expectation that the group’s underlying performance should continue to improve, and of sustained further growth in total collections.
On March 20, 2012, Standard & Poor’s Ratings Services assigned its ‘BB-’ long-term counterparty credit rating to U.K.-based finance company, Lowell Group Ltd. (Lowell). We also assigned a ‘BB’ issue rating and ‘2’ recovery rating to the proposed GBP200 million senior term notes issued by Lowell’s wholly owned subsidiary, Lowell Group Financing PLC. The outlook on Lowell is stable.
The ratings on Lowell reflect the company’s concentration in the U.K. distressed debt purchase market and the operational--including regulatory--risks inherent in its activities. The ratings also take into account the increase in leverage in 2012--as measured by its debt to tangible equity--although we expect this to reduce rapidly. We consider that Lowell’s profitability and cash flow generation have continued to improve over the past few years. Nevertheless, we consider this track record to be relatively short, and believe that the current build-up phase of the company’s receivables portfolio constrains net cash flow generation after we deduct acquisition spend. We view Lowell’s leading market position, marked revenue growth trajectory, focus on in-house recoveries--with little recourse to litigation--and continued investments in proprietary data mining capabilities as positive rating factors.