The debt collector got in over his head

Creditrust CEO was upbeat even into bankruptcy

Who could trust him?

Firm nose-dived after blunders came to light

Credit cards

July 02, 2000|By Bill Atkinson | Bill Atkinson,SUN STAFF

Joseph K. Rensin was living his dream.

He always wanted to build something from scratch, but since he couldn't paint or mold clay into fine sculpture, he did what he knew best: create a company - Creditrust Corp., specializing in the unglamorous business of collecting unpaid credit-card bills.

The company made money one way: buying large portfolios of delinquent Visa and MasterCard loans from banks for pennies on the dollar, and then collecting as much as it could from the card users.

Rensin, 35, whom associates describe as intelligent, energetic, eternally optimistic and aggressive, didn't want Creditrust simply to be successful, he wanted it to be the dominant player in the industry. And he wanted it to be wildly profitable.

Everything went his way. Started 10 years ago in a small College Park office, Creditrust grew from a two-man shop to a company employing 1,200 people at its peak. It swallowed large amounts of office space in Woodlawn and Hunt Valley for its hundreds of employees. Revenue and profit soared and its stock price raced skyward.

But in just seven months, nearly everything Rensin built collapsed. Twelve days ago, Creditrust was forced into bankruptcy protection.

"These are things that happen in the life of any business," Rensin said.

But Creditrust's rapid plunge, one that threatens its very survival, is largely the result of the company's own mistakes, industry experts say.

Those mistakes badly damaged the firm's reputation on Wall Street, helped dry up sources of critically needed capital, and raised doubts of whether Rensin could deliver promised results.

July 29, 1998, Creditrust goes public

"I feel like 100 million bucks. I feel wonderful." - Joseph K. Rensin

Rensin had every reason to be elated. Creditrust's initial public offering was a smashing success, raising $31 million. Money managers and investors couldn't get enough of the stock.

Creditrust initially planned to sell 2 million shares, from $13 to $15 each. But demand was so strong the company added 500,000 shares to the offering and increased the price to $15.50.

Despite the company's strong offering, Wall Street wasn't entirely sold on the industry. "You don't have a lot of proven models," said Joel Houck, senior analyst at A. G. Edwards & Sons Inc. in St. Louis. "You have got a lot of companies that are good operators, but they are small. All it takes is a little blip and they can hit the wall."

If Wall Street was already anxious, it got downright scared five months later, in December 1998, when the industry's biggest player, Commercial Financial Services Inc., of Tulsa, Okla., filed for bankruptcy protection.

Commercial Financial was one of the fastest-growing companies in the country. It made millions collecting on bad credit-card loans, employed nearly 3,900 employees, and its flamboyant founder, Bill Bartmann, and his wife made the Forbes 400 list of wealthiest Americans in 1998.

But if the industry leader couldn't make it, what did that mean for others?

Creditrust for a while actually benefited from Commercial Financial's debacle, buying $546 million in accounts at a steal - less than 5 cents on the dollar.

Creditrust thrived. It landed a $20 million line of credit from Sunrock Capital Corp. of Philadelphia, and its capital ballooned to $95.5 million by October 1998. Revenue more than tripled at the end of the year to $34.3 million, and profit rocketed to nearly $11 million, up from $456,000.

Still, some were not convinced that the company could sustain its success, and at least one industry leader questioned Rensin's grasp of the business.

In March 1999, Creditrust planned to raise $45 million in a secondary offering, and investors met with Rensin to talk about the transaction.

In the meeting, Rensin was asked by a money manager how much money the company would make on a new pool of delinquent credit-card accounts.

Rensin hesitated, then rattled off some numbers, the money manager recalled. After the meeting, the money manager double-checked with Creditrust's chief financial officer, and the figures didn't jibe.

"You can't bid on a piece [pool of loans] if you didn't know it by the penny," the money manger said. "We just said something is wrong. The inconsistency on the numbers was scary."

Rensin said anytime he met with investors he was with Creditrust's CFO, and they used the same numbers. "We have been very forthright and candid with all of our investors," he said.

Creditrust raised the money and bought more portfolios. It then announced plans to open its own bank. Analysts fawned over the company, giving it their highest rating, a "strong buy."

Twelve months after Creditrust went public, its stock more than doubled, reaching a high of $34.125 on July 28.

The heady times didn't last long. Four months later, Creditrust's stock skidded to about $17, and a plan to raise $100 million in a corporate bond offering failed around Thanksgiving.

"The bond market closed down tight as a drum," Rensin said. "It had nothing to do with Creditrust."

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.