THE 'blockage' in debt sales where buyers and sellers could not agree on prices looks like it has been overcome, after one major buyer announced that a series of purchases had been made.
Analysts have described a 'Mexican stand-off' between buyers and sellers over the past 18 months since the start of the financial crisis, where buyers have insisted that prices would need to be severely reduced to account for the weaker expected recoveries from portfolios as consumers began to struggle to pay debts. Higher funding costs have also been a problem for buyers. Sellers insisted that the price reductions were too steep and that they needed to focus on other operation aspects of their businesses.
As the crisis deepened and portfolios started to age, prices dropped accordingly and the situation became worse. However, now, Arrow Global has announced that a number of major deals have been done with both private and public-sector creditors. Deals done include a five-year asset management contract for £1bn claims in 2010 plus £2bn in 2011 to 2015; a £100m face value purchase on a 12-month flow with a global credit card provider; a £58.6m face value purchase - one of the largest ever deals with a UK building society; and a £493m face value purchase on an onward sale of Iberian assets by a large global creditor.
Zach Lewy, chief executive officer of Arrow Global, said: "I predict that the coming year will be busy for sellers and for buyers who are well financed. In addition to what has been agreed for this year, we have a further £1.6bn contracted or awarded for 2011."