Encore buys Cabot stake from JC Flowers

Encore expands it reach in the UK credit market through an usual transaction with JC Flowers. 

Encore Capital Group has purchased a controlling stake in Cabot Credit Management from JC Flowers & Co for approximately £128 million (€149 million; $192 million), the US-based debt management firm announced in a statement Thursday. The transaction is expected to close in the third quarter.

Encore decided to partner with JC Flowers on the deal several months ago but had been unable to finalise its arrangement with the private equity firm before bids on Cabot were due on 15 May. At that point, JC Flowers went forward with the deal without Encore.

“Now that our deal with JCF has been finalised, we will be purchasing a 50.1 percent of their stake,” said Encore’s chief financial officer Paul Grinberg in a presentation detailing the transaction. “Looking ahead, we have created a mechanism to acquire the remaining ownership interest in the company between four and six years.”

Until then, the company will be owned jointly by Encore, JC Flowers and Cabot management, Grinberg said. Encore holds six of the company’s 10 board seats.

Cabot acquires and manages consumer debt in the United Kingdom, with a focus on portfolios where a significant percentage of debtors are already in repayment, according to the presentation.

“Cabot specialises in semi-performing debt. An attractive characteristic of this type of debt is that is has a longer, steadier repayment cycle so we can expect a stream of payments over time and don’t have to deploy as much capital to maintain Cabot’s ERC,” said Encore president Ken Vecchione, who added that the company’s stature in the UK and Ireland was another reason behind his firm’s interest.  

“Encore had been looking to enter the UK market for a long time,” he said. “The UK market is large and it is projected to continue to have robust growth … Banks have a significant backlog of defaulted consumer debt generated by the financial crisis and this debt is expected to come to market in the next few years.”

Encore provides debt management and recovery solutions for consumers and property owners. The San Diego headquartered firm maintains offices or subsidiaries in Phoenix; San Antonio; St. Cloud, Minnesota; Haryana, India and Heredia, Costa Rica.