Creditrust report puts losses at $54.2 million

2nd-quarter results include $49 million in one-time charges

January 12, 2001|By Bill Atkinson | Bill Atkinson,SUN STAFF

Troubled Creditrust Corp., which hopes to emerge from bankruptcy reorganization this month and merge with a Pennsylvania bill-collecting firm, released delayed second-quarter earnings yesterday, posting a $5.2 million loss before one-time charges, according to a document filed with federal regulators.

The Woodlawn-based company, which collects and manages portfolios of delinquent loans, mainly Visa and MasterCard accounts, said in a filing with the Securities and Exchange Commission that its loss in the quarter amounted to $54.2 million, or $5.18 per basic common share, after including one-time charges totaling $49 million.

The loss compares with a profit of $4.9 million, or 47 cents per basic common share, in 1999's second quarter.

Revenue fell 62.8 percent to $6.8 million in the quarter, compared with $18.4 million in the corresponding period a year earlier. In addition, professional fees more than tripled to $2.4 million, compared with $699,000 in the 1999 quarter.

In the first six months of 2000, Creditrust lost $2.5 million before one-time charges. Including the charges, the company lost $51.6 million, or $4.93 per basic common share, compared with a profit of $7.3 million, or 78 cents per basic common share, in the corresponding period a year earlier.

Creditrust's shares, which trade over the counter, closed at 63 cents, up 0.5 cents.

Creditrust plans to come out of bankruptcy and merge into a subsidiary of Fort Washington-based NCO Group Inc., which is one of the world's largest bill collectors. Creditors approved a plan last month that will allow Creditrust to merge into NCO Portfolio Management Inc., a newly formed subsidiary of NCO Group.

The agreement would require NCO to pay creditors in full with interest.

"As far as I am aware things are on track," said David Snyder, co-chairman of the unsecured creditors committee and an attorney representing Constantine Commercial Construction, a large creditor in the case. "There is no reason to believe that the plan won't be implemented."

Creditrust executives did not return phone calls seeking comment.

The agreement is subject to approval by a vote of creditors and by U.S. Bankruptcy Court Judge James F. Schneider. The deadline for submission of ballots is today.

Completion of the deal also hinges on several contingencies. Creditrust must emerge from Chapter 11 bankruptcy protection, which it sought in June, listing assets of $116 million and liabilities of $27.6 million. NCO Portfolio Management also must obtain a $50 million credit facility and qualify for listing on the Nasdaq stock market.

The company, which was started in 1991 by Joseph K. Rensin, its chairman and chief executive officer, grew rapidly in recent years. But the business struggled and last spring its work force was slashed to about 350 workers, down from around 1,000.M-0Creditors in the bankruptcy initially objected to Creditrust's merger with NCO Portfolio, saying they feared that they would be not be paid in full and could receive part of any payment in notes.

In November, disgruntled creditors proposed their own plan of reorganization under which Creditrust would have been sold to Worldwide Acquisitions LLC of Atlanta for $24.5 million in cash. Worldwide bowed out when Creditrust and NCO agreed to pay creditors in full.

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