Sign of the times: In a normal recession, banks slow down their loan-solicitation arms and shift workers over to loan collections, or hire outside collectors. But in this recession, even debt collectors are having a hard time.
Standard & Poor's Rating Services this morning cut credit ratings on NCO Group Inc., Horsham, which operates debt collection and customer service call centers in Asia and North America, citing "the difficult collections environment" and a rising debt-to-profit ratio that puts the company closer to "default," S&P analyst Rian M. Pressman wrote in a report. Also, NCO's former source of acquisition financing, grain processor Cargill Inc., has cut back lending this year.
In its third-quarter report last month, NCO said increased demand from clients trying to get money from customers wasn't enough to fully offset the impact of the economic slowdown -- which makes it tougher to collect. Still, NCO said it hopes to hire another 1,000 to 2,000 workers in the Phillipines (where it already has around 7,000). NCO also has call centers in Canada, India, Panama and other countries.
S&P cut NCO's long-term counterparty rating to B from B+, cut its senior secured credit facility rating to B+ from BB-, and cut its senior unsecured and subordinated debt to CCC+ from B-, adding, "The outlook remains negative."