We invested in Link Financial, which bought and collected charged-off credit card receivables, in an emerging sub-sector that was set for rapid growth.
These portfolios of credit card receivables are typically sold by the major credit card companies and consist of amounts owed by customers that are overdue by varying degrees. The collection of these debts is a time-intensive activity and requires dedicated systems and personnel. As such, many credit companies consider it is as a non-core activity.
At the point of our investment in 2000, the market for credit card receivables was at an early stage in its development; yet as the level of credit card debt was growing fast, the potential size of the market was considerable.
The business grew from a fledgling operation to one of the leading purchasers of charged-off credit card receivables. As the UK marketplace became increasingly crowded, and Link’s ‘first mover advantage’ lessened, we supported management’s ambition to grow the business internationally, and in 2004 Link opened its first overseas office in Madrid.
Following a period of rapid growth, in 2005 we initiated a limited auction and successfully realised our investment, generating a strong return for our investors.