Asta Funding Announcements Bullish on Debt Purchasing in 2006

By Patrick Lunsford, CollectionIndustry.com

Asta Funding, Inc. (Nasdaq: ASFI) today issued a quartet of press releases highlighting revenues and earnings that outpaced expectations, an update on recent large debt portfolio purchases, an increase in the dividend paid to stockholders and the announcement of an increased credit facility to fund increased debt portfolio acquisitions.

The first release was a quarterly and year-end earnings statement for the firm. Asta uses a fiscal calendar which saw its 2005 year end Sept. 30, 2005. For the fourth quarter of 2005, the firm said that net income rose 38% to a record $9,004,000 or $0.62 per diluted share, from $6,509,000 or $0.46 per diluted share, in the same prior year period. According to Thomson Financial, analysts had anticipated earnings per diluted share to come in at around $0.55.

The release continued to state that net income for the year ended September 30, 2005, rose 39% to $30,996,000 or $2.15 per diluted share, from $22,237,000 or $1.57 per diluted share, in the same prior year period. Finance income for the year ended September 30, 2005, was $69,479,000, an increase of 36% compared to finance income of $51,175,000 for the year ended September 30, 2004.

CEO Gary Stern commented, “I am pleased to report another quarter and fiscal year of record results. These excellent results continue to validate our business model, whereby we outsource the vast majority of our collections, and yield exceptional financial performance. We continue to remain pressure-free with regard to our consumer receivable portfolio purchases, and despite a competitive market, our purchases for the year amounted to $3.5 billion of face value receivables with a purchase price of $126 million. Finance income and earnings per share for fiscal 2005 grew 36% and 37% respectively, while expenses only increased 25%, due to our tight expense control, as our expense structure is relatively fixed. Cash collections increased by 48% during fiscal 2005 to $168.9 million.”

The other three releases all seemed to signal an upbeat outlook on portfolio purchases. Asta announced an increased credit facility that will be used to fund an increase in debt portfolio acquisitions. The credit facility, which is underwritten by a consortium of banks, will increase to $100 million, up from $80 million, with an accordion feature to go to $125 million, the company said in its press release. Stern’s comments in this release focused on increased debt purchasing opportunities: “Since the recent change in the bankruptcy law, which took effect on October 17, 2005, coupled with banks increasing minimum payments on credit cards, we have seen a significant amount of charge-offs in the market. We have already closed on a few large portfolios and have several more in the pipeline that we anticipate buying. As we believe this trend should continue and we want to be ready to act on future portfolios that meet Asta’s strict purchasing criteria, we have given ourselves the flexibility to meet these opportunities. We are thankful to our lenders for their continued support and flexibility which has enabled Asta to grow over the last few years.”

Stern’s comments claiming that Asta had “already closed on a few large portfolios” were backed up by yet another release highlighting the firm’s debt purchasing activity in its young fiscal 2006. Asta said that since Oct. 1, 2005, they had “purchased distressed consumer receivable portfolios aggregating approximately $970 million, for a purchase price of approximately $47.7 million” and stated that the portfolios were comprised of credit card and telecom debt. The $970 million in debt portfolios in a little more than two months places the firm’s purchasing activity in 2006 far ahead of 2005′s $3.5 billion total.

Asta also announced today an increase in its regular quarterly cash dividend by 14% to $0.04 per share. Asta said it has paid a dividend every quarter since the commencement of the program in September of 2003.