An interview with the CEO of GPM Vindexus S.A. for NEWSERIA - 11 June 2015
Doing away with bank enforcement orders will make the proceedings more uniform for banks and other creditors, but it will cost debtors more, as they may be required to pay up to 5% of debt value in court fees. More debt will be sold, which is good news for the debt recovery sector. On the other hand, the fact that citizens will no longer be obliged to register for residence, may exacerbate the problems related to recoverability of debt.
Until now, the bank enforcement order has put banks, in their capacity of creditors, at an advantage. Following its elimination as a result of the Constitutional Tribunal''s ruling proclaiming the Bank Enforcement Order as unconstitutional, the proceedings will be made uniform both for banks and for other creditors. After this change, banks will bring cases before the court and pay the related court fees themselves.
– Considering this, banks may wish to avoid court proceedings and as a result more debt will be put up for sale because they will have to choose between selling more quickly or going to court. This, in turn, will rise the prices of debt but a secondary creditor will no longer have to go to court; if anything, they might have to get the enforcement clause in their name– says Jerzy Kulesza, CEO of Giełda Praw Majątkowych Vindexus SA.
Mr Kulesza emphasises that this will also translate into higher costs for debtors.
– After the Bank Enforcement Order is done away with, debtors will pay court fees amounting to 1.25 - 5 of the debt value – says Kulesza.
For the debt recovery marker, a bigger market supply is good news. The positive effects can, however, be wiped out by the proposed lifting of the address registration requirement, which is tentatively scheduled for January 2016. Taking out a loan will be more difficult because it will be more difficult to locate a debtor.
– No one will be willing to give a loan or offer an installment sale to a person whose address of residence is unknown. Such a person would come to a bank, take the money , and we’ll never see them again. People have been promised that the registration requirement will be lifted but nobody has come up with an alternative . And there needs to be an alternative – continues Jerzy Kulesza. – We could do what other countries have done - create a register to allow each citizen to indicate their address of residence. And if the address doesn’t change in the register, this would mean that a person is still living there.
The government is planning to amend the regulation that prohibits bailiff offices to handle too many cases. Until now, more than 50 percent of the debt enforcement market was in the hands of debt factories, i.e. 40-50 largest bailiffs offices. From now on, bailiffs will enforce debt in their district only and the number of cases per office will be reduced.
– Bailiffs used to work in their defined areas but in the past there were only 650 bailiff districts. Now, after the deregulation of the bailiff profession, there are 1500. I think of this change as neutral because there are more bailiffs, more districts and there will be bigger competition. As mass debt enforcement will be prohibited, the competition among bailiffs will become more intense – comments Kulesza.
The changes in the personal bankruptcy law will also have - albeit small - impact on our sector.
– A well done personal bankruptcy process has its advantages. If a portfolio includes debt that can be handled as part of a personal bankruptcy process, the debtor concerned will subject themselves to court proceedings, and it will be possible to avoid the related costs – says Vindexus’s CEO.
Personal bankruptcy can be a good solution for the poorest. Debt repayment is spread over the period of 36 months and if the debtor makes their payments regularly, they can count on the remaining debt being cancelled. In some cases, total debt relief is also possible. The new regulations resulting from the amendment of the Bankruptcy and Reorganisation Law , have significantly relaxed the restrictions on personal bankruptcy. Only debtors who have intentionally gotten themselves into trouble are excluded.
Although last year GPM Vindexus acquired debt for a lower amount than the planned 20-30 million zloty, the CEO Jerzy Kulesza is optimistic about the future. In the first quarter, the Company earned more than 3.1 million zloty, which was a year-high result. Any surpluses are used for early redemption of bonds. However, the competition in the sector is huge and the costs of debt are rising.
– The financial position of the Company is good. We do have the resources and besides we have accumulated a lot of money over the last few quarters. The problem is that we can’t purchase at the real or favourable prices. Still, we have been participating in tenders and I think that we will reach our purchase targets in 2015 – Jerzy Kulesza, CEO of Giełda Praw Majątkowych Vindexus SA., told Newseria.
According to the latest financial statements for the first quarter of this year, the Company’s equity amounted to 118.6 and was the highest in nearly two years. This year’s strategy involves the acquisition of a debt portfolio worth up to 30 million zloty. The execution of this plan will, however, depend, on the market situation.
– The establishment of securitisation funds was a market-driven process which offered more tax advantages to banks. We operate two securitisation funds. And that is enough, as we don’t think that increasing expenses makes a lot of sense. This type of funds offer a greater added value to banks than to businesses – explains the stock exchange-listed company''s CEO.
The GPM Vindexus Group comprises of two funds: GPM Vindexus Non-Standardised Closed-End Securitisation Fund and Future Non-Standardised Closed-End Securitisation Fund. As part of these two funds, the Company holds several million zloty that can be used to cover the costs of debt auctions.
– The competition on the market is huge. The number of businesses with foreign capital is on the rise and companies pay too much for debt. By observing the situation, we have come to a conclusion that where the money and their owner are further apart, spending is easier. The history will show if it was worth it. We will find out if the price was adequate in a few years. It takes time. We are quite cautions about spending our money and we wouldn’t like to, for example, make two bad deals in a row – says GPM Vindexus’ CEO.
In his opinion, the current prices of debt are too high. Telecommunications packages are priced at 30% of their nominal value, which makes them marginally profitable. According to Kulesza, the acceptable minimum rate for a well-documented bank debt amounts to 24-28 percent of the amount due.
– We want to keep increasing our revenue, the profit distributed among our shareholders and the capitals. We wanted to hit PLN 100 mln in annual revenue, but this is taking longer than expected due to the difficult market situation. We haven’t invested enough yet – says Kulesza.
According to the CEO, at the moment the company''s rating is much lower than its real value. Investors sell shares of GPM Vindexus S.A. for around 5 zloty, while the book value of the Company amounts to twice as much.
In 2014, GPM Vindexus’ net revenue amounted to PLN 52.1 million. Net profit margin amounted to nearly 20%. The Company has been active on the debt recovery market since 2002, which is a great advantage. Debt packages acquired at that time continue to generate value while all the related costs have already been incurred. According to Jerzy Kulesza, debt may be considered a good investment if it makes a return in 2-3 years after the purchase.
– May marked the 21st anniversary of our company . Since the beginning our activity has been focused on the debt market. We acquire debt on our own account. We used to do debt recovery for third parties, but only to a very limited extent – he emphasises.
GPM Vindexus is one of the longest-operating debt management companies on the Polish market. The Company has 50 employees.
Source:
newseria.pl, 2015-06-11