Bad-debt buyer Asta Funding Inc. this week reported a net loss of $79.2 million for its fiscal fourth quarter ended Sept. 30.
The company, based in Englewood Cliffs, N.J., buys unpaid consumer and credit card loans and tries to collect them. The company recorded impairment charges in the quarter of $137.3 million, including $53 million from the February 2007 purchase of a $6.9 billion delinquent credit card portfolio from Great Seneca Financial Corp.
Asta Funding paid $300 million for that portfolio, according to Collections & Credit Risk. The company ranks as the No. 7 debt buyer in CCR's 2009 industry rankings after reporting nearly $115.3 million in revenue from purchased debt in 2008.
"A good portion of the impairments were recorded on portfolios acquired during the period of a healthier economy with a robust housing market and very low unemployment," said Bob Michel, Asta Funding's chief financial officer, yesterday during a call with investors and analysts. "With the slowdown in the housing market, the larger payoff of judgments that was associated with a robust housing market has been substantially reduced. People are staying in their houses longer and waiting for their value to increase. As [the] unemployment rate rose to over 10%, garnishments, which became a larger part of the collection base, began to slow down."
Net cash collections of receivables acquired for liquidation totaled $30.8 million during the quarter, down 40% from $51.3 million a year ago.