Easterly to Acquire JH Capital

7/4/17

BOSTON & LOS ANGELES & NEW YORK--(BUSINESS WIRE)--JH Capital Group Holdings, LLC, a leading specialty finance company in the debt recovery industry, and Easterly Acquisition Corp. (NASDAQ: EACQ) announced that they have entered into a definitive investment agreement, whereby Easterly will acquire JH Capital and be renamed JH Capital Group Holdings, Inc. (“JH Capital Inc.”). This transaction is expected to enhance JH Capital Inc.’s competitive position significantly, accelerate its strategic development and cement its long-term growth in providing end-to-end solutions throughout the consumer credit lifecycle.

In the transaction, which is subject to customary closing conditions and approval by Easterly’s stockholders, Easterly will acquire a controlling equity interest in JH Capital. Upon completion of the transaction, JH Capital Inc. will trade on the NASDAQ stock exchange under the ticker symbol “JHCG.”

JH Capital’s management team will remain with JH Capital Inc. Once the transaction is closed, JH Capital Inc. will be led by: Norman Kravetz, Chairman; Douglas Jacobsen, Chief Executive Officer; Anthony Riggio, President; Glenn Corey, Chief Financial Officer; and Christopher Raymond, Chief Risk Officer. Members from the existing boards of both Easterly and JH Capital will serve on JH Capital Inc.’s board of directors. The current owners of JH Capital will retain a substantial equity stake in JH Capital Inc. and are not selling any of their shares as part of the transaction.

“The partnership between JH Capital and Easterly will position the company to be a leader in the debt recovery space,” said Darrell Crate, Chairman of Easterly. “Their consumer-oriented focus leads to superior outcomes for the customers they serve and for shareholders. This transaction will strengthen JH Capital’s balance sheet and provide growth capital to execute on the significant opportunity in the debt recovery industry.”

JH Capital is led by seasoned executives with over 100 years of combined experience. As the U.S. consumer credit market exceeds $1 trillion in credit card debt, JH Capital Inc. represents a unique opportunity to invest in a countercyclical specialty finance business that is well positioned to grow. The business platform offers end-to-end solutions to customers at every stage of the distressed credit cycle, from default to rehabilitation, through its complementary collection, settlement, and specialty lending businesses. JH Capital differentiates itself from public peers Encore Capital Group, Inc. (NASDAQ: ECPG) and PRA Group, Inc. (NASDAQ: PRAA) through its unique, consumer-centric approach that produces superior outcomes for the consumer and yields valuable and proprietary data for JH Capital. Since inception, JH Capital’s data-driven, analytical culture has yielded consistent and predictable results, with collections that have averaged 2.8x gross multiple on invested capital, defined as total estimated collections / portfolio purchases, and an approximately 40% gross IRR.

“Easterly’s management team has a track record of bringing innovative, growing companies to the public markets,” said Douglas Jacobsen, JH Capital’s Chief Executive Officer. “Our partnership will allow us fully to harvest our definable edge in debt recovery and to grow our business through existing channels and through acquisition.”

JH Capital Business Model Highlights

  • Provides a platform of services with end-to-end solutions for consumers at every stage of the distressed credit cycle, from default to rehabilitation.
  • Purchases debt from a diversified network of third-party sellers through both fixed-price, forward flow purchase agreements and opportunistic spot purchases. Focus on consumers and their rehabilitation leads to better recoveries, shorter repayment curves, and highly predictable returns.
  • Operates a captive collection agency that works on behalf of JH Capital as well as third-party banks and other financial institutions. In addition, JH Capital deploys a network of highly-regarded and specialized third-party collection agencies.
  • Through its consumer advocacy services, helps restore credit profiles of defaulted consumers by providing solutions for the consumer to reduce and refinance existing obligations.
  • Leverages data across its platform to create proprietary models of consumer borrowing and repayment behaviors. JH Capital’s multiple business verticals in debt recovery give it a uniquely advantageous view into all segments and participants in the account receivables market.
  • Best-in-class compliance management system – JH Capital successfully passes over 100 annual audits by debt sellers, lenders, as well and federal and state regulatory bodies.
  • Solely focused within the United States with no exposure to foreign markets.

Key Transaction Terms

Under the terms of the definitive agreements for the transaction, at closing, the following will occur:

  • JH Capital’s existing stockholders will roll all their existing equity into JH Capital Inc. and retain approximately 45.4% ownership, assuming no redemptions by Easterly stockholders.
  • The $200 million contained in Easterly’s trust account, less fees, expenses, and amounts distributed upon redemption of Easterly common shares, will be used following the closing by JH Capital to grow the business and to repay existing subordinated debt.
  • The anticipated initial implied market capitalization is estimated to be approximately $412 million, assuming no redemptions by Easterly stockholders.

The transaction has been unanimously approved by the board of directors of Easterly and JH Capital’s equity holders, and is expected to close in the fourth quarter of 2017. The closing is subject to receipt of all requisite regulatory approvals, approval of Easterly’s stockholders, and other customary conditions, but is not subject to a minimum cash condition. The description of the transaction contained herein is only a summary and is qualified in its entirety by reference to the definitive investment agreement relating to the transaction, a copy of which will be filed by Easterly as an exhibit to a Current Report on Form 8-K.

Cantor Fitzgerald & Co. acted as capital markets advisor to Easterly. Hogan Lovells US LLP provided legal counsel to Easterly. Skadden, Arps, Slate, Meagher & Flom LLP and Advisors LLP acted as legal counsel to JH Capital.

About JH Capital

JH Capital is a specialty finance business that offers end-to-end solutions to customers at every stage of the distressed credit cycle, from default to rehabilitation. Its largest segment buys defaulted consumer receivables and strategically places the accounts for collection. Additionally, JH Capital helps consumers rehabilitate their credit profile by advocating on their behalf in the settlement of third-party debt. By leveraging a proprietary combination of data and models, JH Capital can offer loans to select, prequalified consumers, pioneering financial solutions that aim to restore their credit profiles and refinance their existing obligations. JH Capital has a high level of earnings visibility created by contracted, fixed-price forward flow agreements to purchase debt from major financial institutions. Its data-driven, analytical culture has yielded consistent and predictable results relative to expectation with collections averaging 2.8x gross multiple of invested capital, defined as total estimated collections / portfolio purchases, and an approximately 40% gross IRR since inception.

About Easterly LLC

Easterly LLC is an asset management firm that develops engaged partnerships with innovative, growth-oriented companies. Easterly’s core expertise is in acting as a principal to grow business platforms. Easterly enhances businesses as a partner through capital formation, corporate development, and strategic implementation activities. Easterly’s principals have a proven track record of delivering outperformance to both public and private investors across a variety of sectors. For more information about Easterly, please visit Easterly’s website at www.easterlycapital.com.

About Easterly Acquisition Corp.

Easterly Acquisition Corp. is a Special Purpose Acquisition Company sponsored by Easterly Acquisition Sponsor, LLC, an affiliate of Easterly LLC, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or assets. Easterly Acquisition Corp. completed its initial public offering in August 2015, raising $200 million in cash proceeds. Easterly Acquisition Corp.’s officers and certain of its directors are affiliated with Easterly LLC.

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