Debt Collector Lowell May IPO Despite Rival Cabot's Pulled DealBy
Lowell Group Ltd., the debt-purchasing company owned by Permira Holdings and the Ontario Teachers’ Pension Plan, is considering an initial public offering even after a rival joined casualties in the U.K. equity market.
“An IPO clearly is an option,” Chief Financial Officer Colin Storrar said in an interview on Thursday. “The business has a great reputation among prospective equity investors.”
Cabot Credit Management, the U.K.’s biggest debt collector, scrapped its own London listing last week after struggling to generate sufficient investor demand at a targeted valuation of as much as 981 million pounds ($1.3 billion). Lowell is working on plans to finance its 730 million-euro ($865 million) acquisition of Nordic assets, which will make it Europe’s second-biggest collector.
Storrar declined to comment on how much debt Lowell will issue to finance the purchase. A spokesman for Permira, which acquired a majority stake in Leeds, England-based Lowell in 2015, declined to comment on a possible IPO. Ontario officials couldn’t immediately be reached for comment.
Companies in the U.K. have struggled to get share sales over the line in a crowded IPO market this quarter.
Lowell is among companies that have been targeted by short seller Bybrook Capital. The London-based hedge fund backed by Blackstone Group LP has criticized financial reporting by companies that buy overdue debt such as cellphone and credit-card bills. Peter Grauer, chairman of Bloomberg LP, is a non-executive director at Blackstone.
Even some within the industry are cautious. Kevin Stevenson, chief executive officer of U.S. debt collector PRA Group Inc., said on Nov. 8 that money being spent on new acquisitions in Europe is becoming irrational, with negative returns on many deals.
“It’s flawed to assume there’s no value above and beyond the cash flow” generated from operations, citing goodwill, Storrar said. He defended deals in the industry and said Lowell’s portfolio revaluations based on higher future collection forecasts are prudent.
Lowell’s 230 million pounds of 11 percent unsecured bonds, which can be refinanced in November 2018, rose 1.5 pence on the pound to 109 pence on Thursday after the company reported third-quarter earnings.
“The markets are very supportive,” Storrar said. “Despite the outliers of the Bybrooks in terms of their comments, my bonds are trading very strongly.”