Brief overview
- Six years after they stopped issuing new loans, “Hypocredit” and “Creditex” have been sold to the founders of the debt collection company “AMS Bulgaria.”
- The assets securing 12 million euros in overdue debts are of particular value.
- The new owner has two years to clear the portfolio and repay the companies’ 8 million euros in bonds.
The period around Bulgaria’s accession to the European Union will be remembered for record-breaking levels of borrowing. At its peak, credit growth exceeded 50%. After the euphoria came an ice age for bad debts, and the cleanup continues to this day. Initially reluctant, but under pressure from regulatory audits and in search of profitability, banks began openly seeking out specialized debt collection companies. Now, a similar compulsion is behind the latest deal, which is unique in that it involves the purchase not of debt portfolios, but of entire specialized companies—albeit inactive ones, with only an inherited client base.
Six years after it stopped lending and two years before the maturity of €8 million in bonds, the “Hypocredit” and “Creditex” group has a new owner. The business’s founders, Ivaylo Botev and Ivo Georgiev, are selling it to a newly established company created by the owners of the debt collection firm “AMS Bulgaria,” in a deal whose price has not been disclosed. The buyer has set a goal to quickly resolve the cases of the remaining approximately 160 debtors owed to the two companies and to repay the loan to the bondholders. This is the second major deal for the young debt collection company, which has brought on an unnamed Austrian partner for the purchase.
From Hypo to “Heta”
“AMS Bulgaria” is the company founded in 2017 by former HETA managers in Bulgaria—Nikolay Neshev, Stanislav Bozhkov, and Ivelina Aleksandrova. It purchased the remnants of Hypo Alpe Adria’s leasing business from the Austrian government. The deal took place through a change in ownership of “HETA Asset Resolution Bulgaria” and “HETA Asset Resolution Auto Bulgaria,” with the goal of having the new buyer consolidate their receivables and specialize in the debt collection sector, which was yielding a return of about 20% at the time. A year and a half later, the team is reporting its first results—according to preliminary data, revenue from their operations in 2018 totaled 1.1 million BGN, and profit was 200,000 BGN.
Having gained momentum with HETA’s portfolio, the company set its sights on securing the next batch of receivables for collection. The remaining business of the “Hypocredit” and “Creditex” group proved to be a suitable fit. Since 2012, that business had not been expanding through the issuance of new loans. The reason is that over 93% of the loans in the portfolio are in default, and the proceeds from the few performing loans, along with revenue from foreclosed and sold collateral, are barely enough to cover current obligations on the last two bond issues. With maturities totaling 8 million euros approaching in June 2021, the need for a more proactive approach to debt collection is becoming increasingly urgent.
“This is their core business. They’ll handle it better and faster than we can,” commented Svetoslav Dimitrov, speaking on behalf of the sellers. He noted that talks had also been held with other candidates, and the process of transferring the business took about six months.
The Lender with Real Estate
The business of “Hypocredit” and “Creditex” began in 2004, and since then it has financed projects totaling 115 million euros, making it one of the largest players in the non-banking sector. Its founders are Ivaylo Botev and Ivo Georgiev, who initially brought in “TBI Financial Services” as a partner, but the foreign investor’s stake was later purchased by other Bulgarian individuals.
The group’s business model is simple: funding is raised through long-term loans and bond issuances, which are primarily placed with pension funds and banks, while at the retail level, the funds are distributed in the form of loans with terms of up to 25 years, ranging from 10,000 to 1 million euros, secured by real estate mortgages. Clients include both businesses and households; the interest rate at which the loans were granted is unknown, though it was likely not the lowest, given that the company financed itself with bonds bearing interest rates above 7%.
At its peak in 2009, the group had offices in the country’s four largest cities—Sofia, Plovdiv, Varna, and Burgas. It employed 36 staff members, and its loan portfolio reached 26.5 million euros.
At the time of the transaction with “AMS Bulgaria,” the group’s assets totaled 12 million euros, of which 4.5 million euros were seized as collateral. The properties are diverse—ranging from residential units and retail spaces to offices, restaurants, industrial properties, and land parcels scattered throughout the country. The debtors are primarily companies, but there are also individuals who took out loans during the 2008–2009 period.
The New Owner’s Plan
Judging by the pace at which debts have been settled so far, and taking into account the ongoing recovery of the real estate market, “AMS Bulgaria” believes it will be able to manage the assets of “Hypocredit” and “Creditex” within two years. During this time, the company plans to actively purchase bonds of both companies on the stock exchange, hoping that creditors will continue to be willing to accept 50% discounts, as they have done so far. Among the main holders of the debt securities are the pension funds of “Doverie,” and the goal will be to settle the bond loans before their maturities in June 2021.
As with its first purchase, “AMS Bulgaria” will not be the holder of the assets, but rather the company servicing them. The valuable assets will be held in companies specifically created for this purpose—“Kefer” and KLSN,” with the Austrian co-investor in the deal serving as a partner in the latter. This structure makes it possible to thwart attempts to block debt collection activities from debtors.
Nikolay Neshev also shared another detail of the collection company’s strategy with *Capital*, explaining why the deal is about business rather than just a portfolio. Creditex’s license from the Bulgarian National Bank (BNB) can be used to grant mortgage loans, which will generate additional revenue. “In 2018, the dominance of the two major foreign companies with long-term capital—B2Holding and EOS Matrix—was cemented, as they acquired all the large portfolios sold by banks during the year. Prices for non-performing loans have risen, which reduces returns. Small local players have no choice but to consolidate, sell out, or specialize in a specific segment of the distressed debt market. For the first time, major collection agencies are reselling loans they purchased in the past on the secondary market,” the expert explains.
He believes that securing resources for operations—including debt restructuring—can help restart businesses. The team has an example of this from Novi Pazar, where a ceramic tile factory, built by a struggling debtor, was cleared of liabilities and sold to the Turkish company Akgun. Currently, the factory there provides jobs for 130 employees.
Additional information can be found here: https://www.capital.bg/biznes/
