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Non-Tech : Creditrust Corp. (CRDT)
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To: bgarner who wrote (5)3/21/1999 11:30:00 AM
From: Doug (Htfd,CT)  Read Replies (1) of 11
 
So, scrutiny of both the servicing fee and recovery projections may be necessary, especially if the seller expects to also service the portfolio going forward. If I understand what you're saying, if the seller's yield assumptions are too optimistic, the assumed present value of the portfolio may be overstated. If the seller is also the servicer and the 20% service fee doesn't cover its expenses, it will experience operating deficits on servicing that may be compensated for by gains on the portfolio sale.

Can a company get into a trap where they are losing money on operations and only able to sustain revenue growth by bigger and bigger deals in purchase and securitization? Do some companies then have a temptation to continue over-optimism in valuation, in order to put off the day on which the cycle comes apart and more rational revenue levels must be booked?

If that is the trap and temptation that companies in this business must avoid, what specific indicators and statistics should a cautious investor look for in order to determine how well the trap is being avoided?

Is a 20% service fee adequate? If not, what is an adequate fee in this line of work?

How does an investor test the soundness of assumptions that go into the determination of the present value of a portfolio of non-performing debt? What statistics or characteristics should he or she look at?

Doug
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