ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
Page 1
Exhibit 99.2
ASTA FUNDING INC.
MODERATOR: GARY STERN
MARCH 7, 2005
1:00 PM CT
Man: Hi Gary.
Gary Stern: Hello.
Operator: Good afternoon my name is (Kelly) and I will be your
conference facilitator today. At this time I would like to
welcome everyone to the acquisition of Option Card
conference call. All lines have been placed on mute to
prevent any background noise. After the speaker's remarks
there will be a question and answer period.
If you would like to ask a question during this time
simply press star and the 1 on your telephone keypad. If
you would like to withdraw your question press the pound
key. Thank you. Mr. Weinberger you may begin your
conference.
Donald Weinberger: Thank you (Kelly) I'm Donald Weinberger. Good afternoon
and thank you for joining us at this time for the
conference call to discuss the acquisition of Option Card.
By now all of you should have a copy of the press release.
But if by chance you do not please call my office at 212
370-4500 and we will immediately send it to you either by
fax or by email.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
Page 2
Before I ask our host Gary Stern CEO of Asta Funding to
begin his formal remarks please let me take a minute to
read the forward looking statement as required by law.
Except for historical information contained herein the
matters set forth in this conference call are forward
looking statements as defined in the private securities
litigation reform act of 1995.
Although Asta Funding Inc. believes the expectations
reflected in such forward looking statements are based
upon reasonable assumptions there can be no assurance that
its expectations will be realized.
Forward looking statements involve certain risks and
uncertainties that could cause actual results to differ
materially from Asta Funding Inc's expectations. Factors
that could contribute to such differences include those
identified in Asta Funding Inc. form 10K for the fiscal
year ended September 30 2004.
And those described from time to time in Asta Funding Inc.
other filings with the Securities and Exchange Commission
new releases and other communications including that Asta
may not be able to purchase consumer receivables portfolio
at favorable prices or sufficiently favorable terms or at
all and may not be able to continue its quarterly dividend
program.
Asta Funding Inc. reports with the Securities and Exchange
Commission are available free of charge through its Web
site at www dot Asta funding dot com. With that out of the
way let me turn the discussion over to Gary Stern
President and chief Executive Officer of Asta Funding.
Gary please proceed.
Gary Stern: Thank you Don - good afternoon everyone and thank
you for joining us so we can briefly discuss Asta's recent
acquisition. We're very pleased to announce the purchase
of Option Card LLC of Denver Colorado. We were
exceptionally pleased with this acquisition as well as the
other portfolios that Asta has recently purchased.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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Combined Asta's purchased approximately $700 million in
paper during the second quarter and over $1.7 billion for
the first half of fiscal 2005 which ends March 31. We
believe that this morning's announcement of the
acquisition of Option Card is an excellent opportunity for
Asta and essentially should be viewed as a portfolio
acquisition with some added fringe benefits.
This deal includes portfolios of approximately $197
million of distress credit card receivable debt for a cost
of approximately $13.5 million. This transaction was
financed with cash and debt from our credit line and Asta
will assume virtually no liabilities.
The $197 million of portfolios which were originally
purchased at fresh charge offs consisting of paying
accounts and accounts already with legal network as well
as non-paying accounts. Part of which will be forwarded to
the legal network shortly.
In addition Asta has also acquired the rights to purchase
a small flow of fresh charge off receivables for eight
months. This flow of fresh charge offs is with a major
financial institution and represents a new relationship
for Asta which we hope to grow over time.
In addition we are extremely please with the bonus
benefits to this acquisition that is included in the
purchase price such as Option Card's office in Denver
which gives us a presence in the West, buying and debt
management and established network and computer system
that has beneficial features that will be incorporated
into our existing system.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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We also have two managers that are very experience in debt
buying. This transaction is very attractive to Asta as it
allows us to simultaneously purchase paper at an extremely
favor able price as well as adding supporting
infrastructure.
This acquisition is natural fit for us as we will
integrate the Option Card management and its legal network
to help analyze our current base of portfolios as well as
future purchase while continuing to keep Asta's cost
relatively fixed at low levels by outsourcing collection.
The acquisition also brings access to a vast legal network
which will strengthen Asta's existing established legal
network. This is a huge benefit for us because Asta
partially relies on its legal network to successfully
collect its receivables.
In addition we will utilize this office to assist us in
new business as the two managers also have an extensive
network of buyers and sellers. I am delighted with our
portfolio purchases to date for fiscal 2005. As I stated
in the past we will continue to reap the benefits of our
close relationship to seek opportunities to make
additional acquisitions.
The price we are willing to pay for receivables is
strictly driven by a desired rate of return. And we will
continue with this disciplined approach. These two
portfolios during the last few weeks are a true - purchase
during the past few weeks are a true testament of the
strength of our network and relationships that we have
built. Now I would like to open the discussion to any
questions you may have.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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Operator: At this time I would like to remind everyone in order to
ask a question please press star 1 on your telephone
keypad. We'll pause for just a moment to compile the Q&A
roster. Your first question comes from Teresa Mcaleavy.
Teresa Mcaleavy: Hi Gary congratulations.
Gary Stern: Hi.
Teresa Mcaleavy: I'm wondering - can you tell me about the size of the
Denver facility? And also is it just these two workers
that come with it - the two experienced managers?
(Mitch Cohen): Hi this is (Mitch Cohen) - the acquisition comes
with approximately 25 people - small office in Denver. I
think that the office is small - maybe 3000 square feet.
Teresa Mcaleavy: Thank you.
Operator: Your next question comes from Joe Chumbler.
Joe Chumbler: Hey Gary congratulations.
Gary Stern: Thank you.
Joe Chumbler: Can you talk a little bit about how their legal network
differs from your existing network that you've been using?
Gary Stern: How it differs - there are certain synergies there
are certain maturities that they have - that they have the
history with. And we think combined it will enhance our
results.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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Joe Chumbler: So are you thinking more of improved recoveries or
lower legal costs?
Gary Stern: Well hopefully for both - recoveries and lower legal
costs.
Joe Chumbler: Okay and how long has Option Card been around and can you
just say how they've been previously funded?
Gary Stern: Option Card has been around for approximately 2 years. And
it was formed by a group of investors. And we've just -
were able to see some of the opportunity to go in and buy
it up.
Joe Chumbler: All right thank you.
Gary Stern: You're welcome.
Operator: Your next question comes from Steve DeLaney.
Steve DeLaney: Good afternoon guys.
Gary Stern: Hi Steve.
Steve DeLaney: The way you all describe the - the transaction
and the structure it doesn't sound like there is any
reason we should assume that it will not be a positive to
earnings let say over the next two quarters - over the
second half of say calendar - well actually second half of
your fiscal year. Would that be reasonable for us to
assume the way - the way you're describing it?
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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In other words just not - other than the first month or so
it doesn't sound like there should be a - a lot of drag
here if - if the paper has already been put out to - to
legal.
Gary Stern: Well a lot of it has been to legal but they are working
papers and there are a bit amount of collections that are
collected internally. And I would tend to agree with that
and - that statement.
Steve DeLaney: Okay.
Gary Stern: And we are planning - I know you didn't ask but I might
add that we are planning on sending that office a good
amount of Colorado accounts.
Steve DeLaney: Okay.
Gary Stern: We have experience with these - with this management group
and they're excellent collectors - collecting Colorado
accounts was part of our strategy. Is to send paper there.
Steve DeLaney: Got it. Any sense - I know it's early but any
sense as to how much with the new office and the new - the
new marketing effort out there how - would the incremental
quarterly fixed overhead might be - just a range.
(Mitch Cohen): Steve it's...
Steve DeLaney: Maybe I can ask it this way (Mitch) - I mean you'll keep
the two principles. Should we - should we assume that you
keep 25 - the full 25 people that are there? Or we
could...
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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(Mitch Cohen): The answer is yes and now. I would like to keep the
latitude of seeing how it goes. You know there's maybe
some type of transition period over the next 30 to 45
days.
Steve DeLaney: Right.
(Mitch Cohen): And we'll see what shakes out from there. I envision us
having an office with - and a presence out in Denver.
Steve DeLaney: Okay.
(Mitch Cohen): I don't think it will be 25 people
Steve DeLaney: Gotcha. And obviously you bought a company - you
bought a portfolio and you let off about - I suggest we
view it that way. Should we assume that the majority say
90% or so of the purchase price is going to go to cost
basis in the portfolio and a little bit will go to fixed
assets or goodwill or whatever?
(Mitch Cohen): You're exactly right.
Steve DeLaney: Okay so my 90% - I just pulled that out of the air. But
that wouldn't be a bad figure.
(Mitch Cohen): It wouldn't be bad - you know we haven't firmed up the
accounting treatment yet. But you know most of this is
going towards a portfolio.
Steve DeLaney: Okay now Gary this may - this may be the most
important of my questions. Last Thursday night Encore
talked a lot about consolidation as a growth opportunity -
everybody knows how tough the market or competitive the
market is lets put it that way.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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And there was suggestions on their conference call that -
you know one way that the four public companies might look
to grow going forward is through consolidation. And the
ink wasn't dry on the paper and then you come out with a
transaction.
I mean this leads me to wonder - I mean how many other
small private debt buyers - I'm not talking about
collectors - but actual - you know principles like Option
Card are out there. Can you give us some sense of just a
rough estimate of how many companies like this are out
there?
Gary Stern: There are quite a few small debt buyers - we have as of
now not identified any other targets. But there are quite
a few. I don't know the exact number.
Steve DeLaney: A couple dozen maybe?
Gary Stern: No there are more than that.
Steve DeLaney: Okay so...
Gary Stern: Many more than that - but with that being said you know we
have not approached anybody else. And this was a very
opportunistic...
Steve DeLaney: Right.
Gary Stern: Acquisition in our opinion. And we're very happy with it.
Steve DeLaney: Sure.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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Gary Stern: And by the way I want to comment on the competitive
- to the market. The market is competitive and we did say
this on the conference call we had our last conference
call. With that being said because of our strong
relationship you know being - the management team been in
this business for - you know 40 years.
We're able to buy paper very very attractive prices. And
we're very happy with our strategy of not having - you
know large infrastructure. We - we - and this acquisition
fits perfectly for us. And we continue to a strong belief
that we'll buy paper as we see. We've been able to buy a
lot of it the first quarter.
And we're going to just continue to stay disciplined. And
as we - we can just continue to grow this business with
fixed overhead - with very - you know not a material
increase in our overhead. And you know it's a great
situation to be in.
(Mitch Cohen): Steve.
Steve DeLaney: Yes.
(Mitch Cohen): You know to add on to that just a little bit - to date
we've purchased approximately $1.7 billion in paper.
Steve DeLaney: Right.
(Mitch Cohen): And it cost us about 4 cents. So that includes the premium
that's built into Option Card.
Steve DeLaney: Sure. If you blend it - yes.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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(Mitch Cohen): Yes.
Steve DeLaney: Okay and the sales process - I mean you folks
obviously decided they - they would sell their company for
whatever reason. I mean was it negotiated directly with
you all - was it a competitive situation with multiple
bidders?
Gary Stern: We negotiated with them - I don't know if there were other
bidders. But we've known these people for quite a while.
Steve DeLaney: Okay so you knew them before.
Gary Stern: Oh absolutely.
Steve DeLaney: Oh okay.
Gary Stern: For quite a while.
Steve DeLaney: So it wasn't a matter of just getting a book from an
investment banker.
Gary Stern: No no no no investment banker has it.
Steve DeLaney: Okay all right.
Gary Stern: (Unintelligible) transaction.
Steve DeLaney: Okay well thank you very much.
Gary Stern: You're welcome.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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Operator: Once again to ask a question please press star 1 now. Your
next question comes from Jed Gore.
Jed Gore: Hey congratulations - just - you mentioned I think
Gary in your opening comments that this is - that they
have some analytics that will allow you to work on your
current base of portfolio. I was wondering if you could
flesh that out a little bit just for what you were talking
about. What kind of opportunity there is?
Gary Stern: I think it never - two sets of eyes never hurts.
We've always been of that opinion. There are two
experienced people that have been in the industry for a
while. And I think we'll - you know without going into
specifics I'll be as general as I can.
They've had experience in buying paper they have certain
contacts, criteria that they've look at. You know we know
most of but it's certainly hopefully instrumental in
opening up some other doors to purchase paper that we're
not aware of.
They've already opened up one door. This forward flow that
we have. That's absolutely the (unintelligible) point that
is a relationship that we didn't have until we acquired
the company. Granted its small but we hope it will grow.
Jed Gore: Great thanks.
Gary Stern: You're welcome.
Operator: Your next question comes from Michael Nolan.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
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Michael Nolan: Thank you - question back to what you were
discussing earlier - could you talk a little bit about any
type of active internal program to seek out other
acquisition along these lines.
Gary Stern: We're always looking for acquisitions. We basically - we
always are open minded and opportunistic and we'll
continue to do that.
Michael Nolan: But there's no effort on a regular basis to discuss with
smaller private competitors what you interests might be?
Or how are you going to learn about them as you go
forward.
Gary Stern: It's pretty easy - like we pretty well know the
industry people call us all the time to talk about buying
paper - selling paper. So we're in contact with a lot of
people on a regular basis. So we would like to - hopefully
there will be an opportunity where we'll be able to make
an acquisition. Or there may be an opportunity because
some people purchasing paper that too high of a price will
eventually will be forced to sell it at a fire sale.
This is a unique opportunity where we were in the right
place at the right time - we know these people. So we had
this opportunity to purchase this portfolio at a very
attractive price. And have the extra benefits that came
with it.
Michael Nolan: Thank you.
Gary Stern: You're welcome.
Operator: Your next question comes from James Leonard.
James Leonard: Good afternoon guys.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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Gary Stern: Hey.
James Leonard: There's a - as you know there's a great deal of
concern about the cost of portfolio going up. And - and it
looks like just from a rough figuring that you folks paid
probably 50% or more higher for this portfolio than you
have historically. Could you help us understand why - why
this portfolio was worth what you paid for it? And how you
- and explain to us how you're going to get your expected
rate of returns out of it.
Gary Stern: Absolutely this portfolio was purchased a little
bit over 6.75%. All of this paper was fresh - was
purchased as fresh paper when purchased by Option Card. So
we would consider this paper primary recourse. In today's
market this paper probably would trade for close to what
we paid for it without any accounts making payments at
all.
So it was this $195 million - call it $200 million
portfolio my guess would be it would sell for somewhere
close to what we paid for it. We get the extra benefit of
approximately $7.5 million in accounts that are making
payments on a fairly regular basis - that already have
cash flow.
Approximately $45 to $50 million that are already in the
legal network in the process of being sued or the
judgments have been attained already with another $20
million that we have targeted to send legal immediately.
So this is an opportunity where I don't think you should
view this as us paying twice as much for the same asset we
would buy that would be non-performing.
We're buying an asset at such an attractive price that
we're buying an asset with $7.5 million in performing -
what we would call performing charge offs - all these
legal accounts. And then the remaining amount of
non-performing that which some of them we will become
performing as this evolves.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
Confirmation #4524164
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The cash flow in February after attorney's fees was
approximately $650,000 on this portfolio. So it's a very -
you're not comparing apples and apples. Because when one
would buy a portfolio of this nature and pay in the $13
million range the cash flow would be zero day one.
James Leonard: Okay well one other question - something that is
unrelated. Is that is this - does this company Option Card
have the same business platform that you do basically
outsourcing collection. Or do they have some internal
collection capabilities.
Gary Stern: Well they have internal collection capabilities -
they have approximately 25 employees. They collect paper
internally and they also outsource to legal network. They
have the same philosophy we have.
James Leonard: All right and as I understand it probably your
expectations to continue to use their internal collections
sources.
Gary Stern: We're evaluating it - some of it yes - we're not
sure how much. But we're evaluating it. And I did mention
earlier that we intend to send a good amount of our
Colorado paper there because we feel they excel in
collecting Colorado paper.
James Leonard: Now just one clarification - you said that this
portfolio had a cash flow of $650,000 you say in February
and that was after expense - after outsourcing expenses?
Gary Stern: That's the legal expense - yes that is correct their cash
flow is approximately $650,000.
ASTA FUNDING INC.
Moderator: Gary Stern
03-07-05/1:00 pm CT
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James Leonard: Okay thank you.
Gary Stern: You're welcome.
Operator: Your next question comes from Jed Gore.
Jed Gore: Hey just a follow up - could you - Gary did you break out
what you paid - what percentage of cash and debt was for
this deal?
(Mitch Cohen): We didn't but pretty much all of it was from our bank
line.
Jed Gore: Okay thank you.
Gary Stern: You're welcome.
Operator: At this time there are no further questions.
Gary Stern: Okay thank you I'd like to conclude by saying that
we're extremely pleased with this recent portfolio
acquisition and the other portfolio acquisitions we've
made. And believe that the Option Card transaction will
open a lot of new doors for Asta for very little added
cost to the company.
We appreciate your support and thank you for participating
in today's conference call. As always should you have any
additional questions feel free to call (Mitchell Cohen) or
myself. Have a good afternoon.
Operator: Thank you this concludes today's conference call.
You may now disconnect.
END