Debt Buyer and Collection Agency WAM Takes a Hit in First Quarter

West Asset Management (WAM), the accounts receivable management division of call center and communication giant West Corporation, late Wednesday reported lower earnings and revenue for the first quarter of 2008 on portfolio impairments due to a “weaker than expected collection environment.”

For the quarter, WAM reported a net loss of $12.7 million, compared with $13.6 million in net income in the first quarter of 2007. Revenues at the unit slid more than 16 percent to $51.1 million in the quarter.

The company took a $24.2 million impairment charge on purchased portfolios in the quarter, reporting it was “due to reduced liquidation rates on existing portfolios associated with weaker economic conditions for consumers which resulted in a weaker than expected collection environment.”

West’s CFO, Paul Mendlik, noted in the earnings press release that changing economic conditions had forced the company to scale back its debt buying activities. In the quarter, Mendlik noted that the company spent $22.5 million buying debt portfolios compared to the $36.9 million it spent in the first quarter of 2007.

West also noted that agreements with affiliates of Cargill Financial Services Corp. to evaluate and finance debt portfolio purchases are currently under review. Cargill has expressed a desire to modify the terms of the agreements, effective immediately, in a way which would be less favorable to West. West is currently evaluating its financing sources to support its portfolio receivable purchases but expects to fund its existing forward flow purchase commitments with the Cargill facility through the end of 2008.