Thanks Madtrader for tackling this perspective. I agree that for...

Thanks Madtrader for tackling this perspective. I agree that for a CLH and other DCAs more generally, the initial price paid is key. I believe that this fundamental point underlies why CLHs reluctance to pay for expensive PDLs is actually a positive for the company, particularly when coupled with your later point that a downturn is a double edged sword. More stress surely for DCAs that are collecting from a higher entry point? The key is whether traders believe we are facing downturn conditions? In my opinion and all economic indicators suggest that we are.

As for your other points on banking behaviour, yes it's true that banks hold more capital for default rated exposures. However offloading these at a deep discount to a DCA would imply a significant Loss Given Default and accounting write off. Characterising this as ' making a quick buck' is misleading at best.

More likely is the downturn scenario in which the banks existing internal DC department is overwhelmed with the volume in a downturn and the bank requires support from a DCA. An outsourced arrangement of sorts. Perhaps the model for the ATO is actually the future business model? A service model as opposed to a PDL model?

In any case, the source of this thread was an article about oil and gas losses. Methinks that a call centre in Brisbane isnt going to help a bank collect on this debt. Non retail debt is collected in house by old credit dogs or a specialist insolvency firm. CLH is neither.