Debt purchasing and debt servicing is a specialised industry with some industry-specific terminology, alternative performance measures and abbreviations.
Below are some of the most used terms listed and defined.
Alternative performance measures used in financial reports are defined in the applicable report and presentation.
Cost to collect (CtC)
All external and internal operating costs related to the Group’s collection business
Cash EBITDA consists of EBIT added back depreciation and amortisation of tangible and intangible assets and added back amortisation and revaluation of purchased loan portfolios. Cash EBITDA is a measure of actual performance from the collection business (cash business) and other business areas
Earnings before interest, taxes, depreciation, and amortization
Financing of receivables through an arrangement between a financial institution and a client (company), where the client gets advances from the financial institution in return for receivables
Forward flow agreement
Agreements where the Group agrees with the portfolio provider that it will, over some period in fixed intervals, transfer its non-performing loans of certain characteristics to the Group
Gross cash collection
Gross cash collection is the actual cash collected and assets recovered from purchased portfolios before costs related to collect the cash received
Estimated remaining collection (ERC) expresses the gross cash collection in nominal values expected to be collected in the future from the purchased loan portfolios owned at the reporting date and the Group’s share of gross cash collection on portfolios purchased and held in joint ventures. ERC includes ERR. The Total ERC is a common measure in the debt purchasing industry; however, it may be calculated differently by other companies and may not be comparable.
Estimated remaining recoveries (ERR) expresses the gross cash collection in nominal values expected to be recovered in the future from the purchased secured loan portfolios owned at the reporting date and the Group’s share of gross cash collection on secured portfolio purchased and held in joint ventures
Face value (book value); the unpaid principal balance (UPB) plus interest and fees
Net cash flow; Cash flow less collection cost
Internal rate of return; The zero-NPV generating interest rate
Accounts receivables management
Non-performing loan: When a debtor has not made his/her scheduled payments for at least 90 days, the loan is defined as a non-performing loan (NPL)
Individual voluntary arrangement
Loan to value ratio
Credit management services
Earnings per share
Full-time equivalent: The number of employees in the Group, recalculated to full-time positions
A portfolio an the investment in secured (with collateral) and/or unsecured (without collateral) loan portfolios.
A large individual claim, usually a secured loan.
Retail (consumer) claims without collateral; Smaller claims, typically consumer loans, credit card debts, etc. Forward flow agreements are usually unsecured.
Claims secured with collateral; mortgage secured loans, loans secured with corporate real estate, etc. Secured portfolios will typically have a larger average face value per claim and fewer debtors per portfolio.
Collection of debt on behalf of others, such as banks and other credit providers.
Unpaid principal balance