Debt Buying Giant Sherman Sees $296 million in Revenue in Quarter

Sherman Financial, the largest debt purchaser in the U.S., had operating income of $77.8 million in the second quarter of 2008 as quarterly revenues approached $300 million, according to SEC filings of two companies that jointly own 45 percent of the accounts receivable management firm.

Radian Group Inc. (NYSE: RDN), a mortgage insurance company, Monday reported results for the quarter ended June 30, 2008. Although the group reported a large loss — $392.5 million — in the quarter, their stake in Sherman brought in income of $15.7 million and dividend payments of $19.5 million.

Radian said that in the second quarter, Sherman saw pretax operating income of $77.8 million. Radian has a 21.8 percent ownership stake in Sherman. Radian did not compare second quarter income at Sherman to previous periods.

Sherman’s overall revenues in the second quarter came to $296 million, a 4 percent increase from total revenues in the same period in 2007, according to Radian. In the first six months of 2008, Sherman’s revenues have totaled $589 million, up 3.5 percent from the first half of 2007.

Last month, MGIC Investment Corporation (NYSE: MTG) — a sometimes-competitor and sometimes-partner of Radian, and a 24 percent stakeholder in Sherman — said in its second quarter financial report that its Sherman stake contributed earnings $0.09 per share to its results. MGIC lost a total of $98 million, or $0.79 per share, in the quarter. Both MGIC and Radian’s quarterly results were driven by turmoil in the U.S. housing market.

MGIC said that the contribution from Sherman amounted to $11.2 million after tax.

MGIC and Radian last fall sold a significant portion of their stakes to Sherman management last fall (“Sherman Management Pays $519 million for 37% of Firm,” Sept. 24, 2007). The deal, which saw Sherman’s management fork over $519 million for majority interest in the debt purchaser, also included an option for MGIC and Radian to sell their remaining shares within a year.

In its earnings release, Radian pointed out that it still has the option to sell its stake in Sherman when commenting on its liquidity position.