Encore Capital Group Acquires Bankruptcy Service Provider Ascension Capital Group, Ltd. for $22 million

SAN DIEGO – Encore Capital Group, Inc. (Nasdaq: ECPG), a leading accounts receivable management firm, today announced the acquisition of Ascension Capital Group, Ltd., a leading provider of bankruptcy services to the finance industry, for a combination of $17.8 million in cash, $4.0 million in common stock and assumption of approximately $450,000 in debt.

Based in Arlington, Texas, Ascension Capital Group serves as the outsourced manager of secured bankrupt accounts for many of the nation’s leading lenders. Their services include, among others, negotiating consumer bankruptcy plans; monitoring and managing the consumer’s compliance with bankruptcy plans; and recommending courses of action to clients when there is a deviation from a bankruptcy plan.

In 2004, Ascension Capital Group generated revenue of $12.3 million and cash flow from operations of $2.2 million. In 2005, Ascension Capital Group is expected to generate revenue of approximately $14.2 million and cash flow from operations of $3.8 million.

“The acquisition of Ascension is a key step in our long-term strategy to diversify into complementary businesses within the consumer debt recovery industry,” said Carl C. Gregory, III, Vice Chairman and CEO of Encore Capital Group. “The secured bankruptcy services market is extremely attractive as it is experiencing significant growth, yields higher margins than traditional contingency debt collection businesses, and has a built in ‘barrier to entry’ due to high start-up costs coupled with the specialized bankruptcy technology required to maximize client recovery potential. Ascension’s ability to use this specialized bankruptcy technology engenders strong customer loyalty due to the enhancement of its clients’ bankruptcy recoveries. Through this transaction, we have taken a leadership position in an area of consumer debt recovery that is just beginning to emerge, and in the process, significantly enhanced our ability to generate profitable growth in the years ahead.”

“Ascension Capital Group has generated significant growth in monthly bankruptcy placements over the past four years and has an excellent pipeline of potential new customers that we believe can sustain the strong growth rate in their business,” said Brandon Black, President and COO of Encore Capital Group. “We believe significant synergies exist between our two companies that will have a positive impact on the growth of both the bankruptcy services business and our traditional collection business. We are particularly impressed with the robust intellectual property that Ascension Capital Group has developed that allows the company to automate much of its bankruptcy administration procedures. This system, along with the company’s unparalleled understanding of the bankruptcy process and its team of talented and experienced bankruptcy specialists, systems technicians, analysts and client services personnel, has helped them generate a recovery rate for its clients that substantially outperforms the industry average. This presents a compelling value proposition that we believe will help attract additional lenders to outsource their bankruptcy functions to Ascension Capital Group in the future.”

Key benefits of this transaction include:

• The addition of a growing, profitable revenue stream that increases the diversification of Encore Capital’s business mix.
• Immediate accretion to cash flow from operations. Due to amortization of intangible assets resulting from the acquisition, the transaction is not expected to have a material impact on EPS during the first year of operations, although this estimate is subject to the final valuation and allocation of the purchase price.
• A leadership position in the attractive bankruptcy services market that has significant untapped opportunities. Encore Capital estimates that only a small percentage of lenders currently outsource their bankruptcy administration process.
• Strong cross-selling opportunities resulting from the sale of auto bankruptcy account services to Encore’s existing relationships in the auto space, the sale of bankruptcy services for other asset classes to Encore’s other core relationships, and new opportunities for Encore to purchase charged-off accounts from Ascension Capital Group’s clients.

Erich M. Ramsey, Ascension Capital Group’s founder and Chief Executive Officer, and other members of Ascension Capital Group’s senior management team have signed employment agreements with Encore Capital Group.

“Encore Capital is a great cultural fit for our company, as it shares our entrepreneurial spirit and commitment to innovation,” said Mr. Ramsey. “We are extremely proud of the reputation we have built in the bankruptcy services industry, and we believe the resources and relationships that Encore Capital can provide will help us to fully capitalize on the significant growth opportunities available to us.”