DEALING IN DEBT
Firm Sees Demand for Sales of Uncollectible Accounts
By RAJIV VYAS
Irvine’s Vengroff Williams & Associates Inc., which collects accounts receivable for other companies, has started repackaging and selling bad debts,a service it says is in demand these days.
Vengroff sold its first portfolio of $180 million in bad debts pooled from six pharmaceutical companies in December, according to Mark Vengroff, the firm’s president. An East Cost company that specializes in buying bad debts and then trying to collect on them bought the portfolio.
“We are finding enormous amount of interest,” Vengroff said.
The firm started debt brokering in November after Vengroff said he realized some of his clients were faced with more bad debts amid the economic slowdown.
By pooling and packaging bad debts by category, companies can get about 25% more than if they had tried to sell those debts on their own, Vengroff said. Several small to midsize finance companies specialize in buying bad debts and then trying to recover those loans.
The drug companies that were part of the $180 million portfolio sale received $1.1 million for their debts.
“We expect to get on an average 2% to 4% on every dollar,” Vengroff said.
Debt brokering is an outgrowth of Vengroff’s business of managing accounts receivable. As it is, clients bring troublesome accounts to Vengroff, which recovers about 30% of the money owed. The remaining 70% is written off as bad debt, Vengroff said.
The new division seeks to take uncollectible accounts and sell them to someone looking to take a stab at collecting on them. Vengroff creates debt portfolios ranging in size from $5 million to $100 million.
“We are putting more portfolios on the block in the coming months,” Vengroff said. “We can package up blocks of approximately $100 million per month on the market for sale from our current client base alone.”
The firm is targeting upward of $1 billion in debt brokering by the end of the year, he said.
“Now we are going after manufacturers, medical device makers and computer makers and almost every industry except insurance,” Vengroff said.
Vengroff handles more than $11 billion in receivables for companies such as Cisco Systems Inc., the American Stock Exchange, Microsoft Corp. and State Farm Insurance Cos., according to Vengroff.
Harvey Vengroff, Mark Vengroff’s father, founded the firm. It has 15 offices worldwide and more than 700 employees. Vengroff is based in Sarasota, Fla., with its main administrative office in Irvine, where it has more than 75 workers.
