KRUK, a leader of the debt collection market in Central Europe, and P.R.E.S.C.O., one of leading companies investing in debt portfolios on the Polish and Russian markets, have agreed on the key terms of the acquisition of 100% of shares in Presco Investments S.à r.l, holding a debt portfolio purchased in Poland with a total nominal value of PLN 2.7bn. The parties have agreed on a maximum price of PLN 220m, less adjustments provided for in the agreement. The transaction closing is contingent on the outcome of final negotiations and subject to satisfaction of certain formal requirements, which include clearance by the Polish Office of Competition and Consumer Protection (UOKiK).
“For some time now, we have signalled KRUK’s interest to be part of the consolidation of the debt management market, especially in the area of secondary portfolio trading. From the Polish market’s perspective, we believe this to be the most attractive and favourable plan for all parties concerned. In practice, the transaction’s key element is a thorough analysis of the debt portfolio. Rather than on the portfolio’s carrying amount, the assessment is based on our expectations as to how effective can our collection efforts be following the purchase. P.R.E.S.C.O. is an efficient and well organised entity but for years it has focused on debt collection through court enforcement, and does not have the extensive field office structures and amicable approach to debt collection that KRUK has developed, which are both crucial for portfolio value creation. Therefore, the price reflects our view of the quality of the portfolio, which until now has been subject primarily to court-ordered collection,” said Piotr Krupa, President of the KRUK Management Board. “Both KRUK and our prospective partner in the transaction are very excited, as this would be the first transaction on such a large scale on Poland’s secondary debt management market. It would pave the way to new business opportunities for both the KRUK Group and P.R.E.S.C.O.”
For the transaction to be consummated, a number of conditions stipulated in the letter of intent signed by the parties must first be satisfied, including certain formal requirements, such as clearance by the President of UOKiK. The deal would involve the transfer of 2 million cases managed by the P.R.E.S.C.O. Group on the Polish market, which would be an addition to the KRUK Group’s current case base, which at the end of H1 2015 totalled PLN 24bn (based on nominal values of debt portfolios on the purchase dates), bringing the number of cases purchased for collection by the KRUK Group to over 5 million.
Given this large volume of cases purchased in a single transaction, the KRUK Group may need to strengthen its operating structures. One of the possible options is the utilization of a part of P.R.E.S.C.O.’s operating centre, but the details are yet to be finalised.
“We believe that the acquisition of P.R.E.S.C.O.’s subsidiary by KRUK S.A., coupled with a possible take-over of a part of P.R.E.S.C.O.’s operating structures in Piła, may be a source of significant synergies to the KRUK Group. The experience of P.R.E.S.C.O. team and the excellent processes of the market leader may be successfully combined to fully exploit the potential offered by the newly purchased debt portfolio. This is why I am deeply convinced that the deal will be highly profitable to both parties,” said Krzysztof Piwoński, President of the Management Board of the P.R.E.S.C.O. GROUP.
“As an innovator on the debt management market, KRUK is always keen to set new trends and take advantage of market opportunities. In 2007, we were the first Polish debt management firm to enter foreign markets. In 2008, we were the first to implement an amicable approach to debt collection, supported by massive media campaigns. Last year, we entered the market of mortgage-backed debt portfolios. This year, we took the first steps to establish our presence on Western European markets, and now we have set our sights on becoming the leader of another market segment in Poland – that of secondary debt trading. We estimate the nominal value of all debts put out for sale in Poland since 2007 at approximately PLN 70bn. It is difficult to ascertain today how much of that amount has secondary trading potential. We are open to negotiations with any partners looking to monetise their assets and sell their debt portfolios,” said Piotr Krupa.
“Once the transaction is finalised, P.R.E.S.C.O. GROUP SA intends to concentrate on promising consumer finance projects that we have worked on over the last quarters,” Mr Piwoński added.