Magazine article American Banker

Supply's Low, Prices High for Newly Charged-Off Debt

Magazine article American Banker

Supply's Low, Prices High for Newly Charged-Off Debt

Article excerpt

Byline: Peter Lucas

Tight supply has sent prices for the freshest portfolios of charged-off consumer debts soaring in recent weeks to as much as 12 cents on the dollar.

Prices for these portfolios are now averaging more than 9 cents on the dollar, according to debt buyers.

In June, prices for new chargeoffs were running between 5 cents and 7 cents on the dollar, up from a low of 3 cents at the start of the year.

Stacey Schacter, the chief executive of Vion Receivable Investments, said his company was recently outbid on a portfolio by a lender it had been buying from for nearly two years.

"We increased our price a lot and still lost," Schacter said. "Since there is less supply, we are seeing some buyers willing to pay more for fresh chargeoffs to continue feeding their shops."

As has been the case for months, availability of fresh portfolios has dwindled as lenders hold on to recent chargeoffs longer.

Earlier in the year lenders were holding back new paper and working it in-house or assigning it to agencies, because prices were so low.

With prices rising and bidding wars ensuing more often, lenders and creditors are more inclined to wait for prices to hit the level they want before selling.

"A year ago it was the buyers who were sitting on the sidelines waiting for prices to drop further before they moved on a portfolio. Now it's the sellers that are waiting out the buyers," said Joel LeBlanc, a regional sales manager for Atradius Credit Insurance Inc. "Citibank has delayed the sale of some portfolios for months in the hope they get a higher return. …

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