NCO Group repays $103.8 million of senior credit facility in 2009

By Jennifer Lanning Drey

Portland, Ore., April 6 - NCO Group, Inc. repaid $103.8 million of debt outstanding under its senior credit facility and $23.4 million of debt outstanding under its non-recourse credit agreement in 2009, John Schwab, NCO's chief financial officer, reported Tuesday during its fourth-quarter earnings conference call.

"As demonstrated in 2009, we continue to focus on increasing our liquidity through debt reduction, working capital management and strict control of investments, including capital expenditure and portfolio purchases," Schwab said.

NCO had $39.2 million of cash and cash equivalents and $17.0 million outstanding on its revolving credit facility at Dec. 31.

"We believe that we will be able to finance our current operations, planned capital expenditure requirements, internal growth and debt service obligations for at least the next 12 months with the funds generated from our operations, as well as our existing cash and available borrowings on our senior credit facility," Schwab said.

Due to the expectation that the collection environment will remain challenged in 2010, as well as the potential for regulatory changes, NCO is focused on maximizing the cash potential from its existing accounts, NCO chief executive officer Michael Barrist said during the call.

Accordingly, the company has decided to limit purchases of delinquent accounts receivable in 2010 to existing commitments, he said.

With a mind toward that decision, as well as the expected operating environment, NCO is projecting its adjusted EBITDA will decrease by about 15% in 2010 as compared to 2009, he said.

Covenants amended

NCO amended its senior credit facility on March 31 as a result of the challenging operating environment and scheduled financial covenant ratio adjustments required under the company's senior credit facility in 2010, Schwab said.

The amendment increased the maximum leverage ratios allowed under the facility and decreased the permissible minimum interest coverage ratios, Schwab said.

NCO's leverage ratio was 4.59 times at Dec. 31, compared with a maximum of 5.5 times allowed under the credit facility.

The interest coverage ratio was 2.3 times at Dec. 31, compared with a minimum of 1.85 times allowed under the facility.

NCO is currently in compliance with all of its debt covenants, Schwab said during the call.

For the fourth quarter, NCO reported revenues of $409.5 million and adjusted EBITDA of $47.8 million. The figures compared to revenues of $362.5 million and adjusted EBITDA of $48.0 million in the fourth quarter of 2008.

NCO is a Horsham, Pa.-based provider of business process outsourcing services.

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