Creditrust plans IPO of up to $30 million It wants to reduce debt, buy troubled portfolios

Credit industry

July 24, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

Creditrust Corp., a rapidly growing Baltimore-based company specializing in collecting unpaid credit card principal, plans to raise as much as $30 million in an initial public offering scheduled for Wednesday.

The company said it will issue 2 million shares of common stock to the public at prices ranging from $13 to $15 a share, according to a prospectus filed with the Securities and Exchange Commission.

Creditrust plans to use the money to pay off $6.5 million in debt and to buy troubled credit card portfolios from banks and finance companies.

The credit card workout business is "probably going to be a fertile one over the next few years," said John J. Rezai, an analyst at Blaylock & Partners LP in Baltimore. "Consumer debt levels have continued to rise. There are some concerns where the economy and employment levels are going to go."

The offering is scheduled to be priced Tuesday evening, and it is being underwritten by Washington-based Ferris, Baker Watts Inc. and Boenning & Scattergood Inc. of suburban Philadelphia.

Creditrust has applied for a listing on the Nasdaq stock market under the symbol CRDT.

Company officials declined to comment for this story because they are in a "quiet period" required by regulators at the time of a stock offering.

Creditrust is betting that consumers will keep using their plastic and that delinquent credit card loans will continue to soar.

Gross credit card write-offs are expected to increase to $38.8 billion in the next year and a half and should reach $51.8 billion by 2005, according to the Nilson Report.

"That bodes well for the type of service" Creditrust provides, Rezai said.

Creditrust was started about eight years ago by Joseph K. Rensin, who owns 100 percent of the company, and will retain 75 percent of the outstanding shares after the offering, the prospectus said.

Since its inception, Creditrust has grown quickly and profitably.

From 1993 to 1997, the number of employees has jumped to 245 from 44; the number of accounts has grown to 580,353 from 27,366; and the portfolio of credit card receivables is $1.1 billion, up from $71.2 million.

Last year, Creditrust made $456,000 on revenue of $9.8 million, compared with net income of $474,000 for the same period a year earlier, on revenue of $5.5 million, according to the prospectus.

Pub Date: 7/24/98

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