Debt Buyer Asta Funding Posts Quarterly Loss on Decline in Revenue

Accounts receivable management firm Asta Funding reported last week a loss for three months ended March 31, 2009, its second fiscal quarter. The loss was smaller than the loss reported in the year ago period.

Englewood Cliffs, N.J.-based Asta Funding, Inc. (Nasdaq: ASFI) recorded a net loss of $5.2 million, or $0.36 per share, compared to a net loss of $7.7 million in the same period in 2008.

Revenues in the quarter were down more than 46 percent to $18.1 million. Net cash collections fell 26 percent to $36.9 million. The company explained that the reduction in revenues was largely due to accounting changes on a massive portfolio.

In March 2007, Asta purchased a debt portfolio with a face value of $6.9 billion. The purchase price was reported as $300 million. In its third fiscal quarter of 2008, Asta transferred the portfolio to the cost recovery method of accounting from the interest method. Since the portfolio was accounted for differently in the period ended March 31, 2008, year-over-year revenue comparisons are impacted.

"While our finance income contracted due to the transfer of our large portfolio purchase of March 2007 to cost recovery and portfolio purchases have slowed, we have sharply reduced our debt in this difficult economic environment,” said Gary Stern, Asta’s chairman and CEO, in a press release. “We have reduced our debt by approximately $53 million since September 30, 2008 and more than $125 million from a year ago.”

Asta recorded an impairment charge on its portfolios of $18.4 million in the first three months of 2009, down significantly from the impairment of $35 million in the same period a year ago. “The impairments in the current quarter are related to twelve portfolios where cash collections have deteriorated given the challenging collection environment we have been experiencing over the last six to twelve months,” said Stern. “Since the beginning of fiscal year 2009, of the total impairments recorded, $8.9 million is attributable to three of our portfolios that were transferred from the interest method to the cost recovery method.”

In the period ended March 31, 2009, Asta purchased only $44 million in charged-off consumer debt at a cost of $1.6 million. But the company noted that it has increased its purchasing activity lately, spending $3.7 million on face value debt of $64.2 million in April alone.