Debt-collection climate adverse to Baycorp IPO

Baycorp Advantage will have to work hard to convince local investors of the merits of the proposed spin-off of its debt-collection business, brokers say.

The company said last week it was considering a New Zealand initial public offer (IPO) of the collection business which it is separating from its core credit information operation.

But Macquarie Equities investment director Arthur Lim said the credit bureau and debt-collection industry had gone from being a market superstar to a pariah during the past five years.

"For Baycorp to look at an IPO, it will have to be a very, very convincing story for investors to embrace it."

The situation had not been helped by the collapse last year of Australian rival RMG and the recent difficulties faced by Australia's largest debt collector, Collection House.

"The industry has got itself into all kinds of strife," said Lim.

Last year, Baycorp managing director Andrew Want tipped a New Zealand IPO for the collection business because of the brand's strength here.

The Baycorp debt-collection business was founded in 1956 in Lower Hutt but, in 2001, merged with Sydney-based Data Advantage to become an Australian company.

Last August, New Zealanders accounted for 40 per cent of its share register by number and 20 per cent by value. However, it is believed many sold up during Allco Equity Partners' failed bid for the company.

Hamilton Hindin Greene broker James Smalley said the climate on the local market was not good for any IPO.

"I'd say they'd have to price it fairly attractively given the state of the local market and perhaps the economy going forward."

While the recent Goodman Fielder float had a lot of support from Australian and international institutions "this is going to be a relatively small IPO".

Want said last week Baycorp also had multiple buyers interested in a trade sale of the collection business.

A decision on whether to proceed with an IPO would depend on the strength of trade sale offers.