Profile: Asta Funding Inc (ASFI.O)

Asta Funding, Inc., incorporated on August 2, 1995, together with its wholly owned operating subsidiaries Palisades Collection LLC, Palisades Acquisition XVI, LLC (Palisades XVI), VATIV Recovery Solutions LLC (VATIV) and other subsidiaries is engaged in the business of purchasing, and managing for its own account. The Company’s charged-off receivables consisting of accounts that have been written-off by the originators and may have been previously serviced by collection agencies. Its semi-performing receivables consisting of accounts where the debtor is making partial or irregular monthly payments, but the accounts may have been written-off by the originators. Its performing receivables consisting of accounts where the debtor is making regular monthly payments that may or may not have been delinquent in the past. Its distressed consumer receivables consist of the unpaid debts of individuals to banks, finance companies and other credit and service providers. Its distressed consumer receivables are MasterCard, Visa and other credit card accounts which were charged-off by the issuers or providers for non-payment.

It acquires these and other consumer receivable portfolios at substantial discounts to their face values. The discounts are based on the characteristics (issuer, account size, debtor location and age of debt) of the underlying accounts of each portfolio. In addition, the Company, through certain majority-owned subsidiaries, invests in funding personal injury and matrimonial claims.

Consumer Receivables Business

The Company purchases bulk receivable portfolios that include charged-off receivables, semi-performing receivables and performing receivables. These receivables consist primarily of MasterCard, Visa and private label credit card accounts, among other types of receivables. It identifies potential portfolio acquisitions on an ongoing basis through, its relationships with industry participants, financial institutions, collection agencies, investors and financing sources; brokers who specialize in the sale of consumer receivable portfolios, and other sources. It utilizes its relationships with brokers, third-party collection agencies and attorneys, and sellers of portfolios to locate portfolios for purchase. The seller or broker typically supplies the Company with either a sample listing or the actual portfolio being sold, through an electronic form of media. It analyzes each consumer receivable portfolio to determine if it meets its purchasing criteria. The Company purchases consumer receivable portfolios directly from originators and other sellers including, from time to time, its third-party collection agencies and attorneys, through privately negotiated direct sales and through auction-type sales in which sellers of receivables seek bids from several pre-qualified debt purchasers. It also, from time to time, uses the services of brokers for sourcing consumer receivable portfolios.

The Company generally uses third parties to determine bankrupt and deceased accounts, allowing it to focus its resources on portfolio collections. Under a typical portfolio purchase agreement, the seller refunds the portion of the purchase price attributable to the returned accounts or delivers replacement receivables to the Company. Occasionally, it acquires a well-seasoned or older portfolio at a reduced price from a seller that is unable to meet all of its purchasing criteria. When it acquires such portfolios, the purchase price is further discounted beyond the typical discounts it receives on the portfolios it purchases. VATIV, wholly-owned subsidiary located in Houston, Texas, provides bankruptcy account servicing. VATIV provides it with internal experience and systems in support of servicing own bankruptcy accounts, while also affording it with the opportunity to enter new markets for acquisitions in the bankruptcy account field.

Receivable Servicing

The Company’s objective is to maximize its return on investment on acquired consumer receivable portfolios. As a result, before acquiring a portfolio, it analyzes the portfolio to determine how to maximize collections in a cost efficient manner and decide whether to use a third-party collection agency or an attorney. Unlike collection agencies that typically have only a specified period of time to recover a receivable, as the portfolio owner, it has significantly more flexibility and can establish payment programs. The Company outsources a amount of its receivable servicing to third-party collection agencies and attorneys. It receives detailed analyses, including collection activity and portfolio performance, from its internal servicing departments for the purpose of evaluating the results of the efforts of the third-party collection agencies and attorneys.

Litigation Funding Business

The Company, through its subsidiary Pegasus Funding, LLC (Pegasus) business model entails the outlay of non-recourse advances to a plaintiff with an agreed-upon fee structure to be repaid from the plaintiff’s recovery. Typically, such advances to a plaintiff approximate 10-20% of the anticipated recovery. These funds are generally used by the plaintiff for a variety of urgent necessities, ranging from surgical procedures to everyday living expenses.