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Executives

Adam Sragovicz - Director of Finance and Treasury

J. Brandon Black - Chief Executive Officer, President and Director

Paul J. Grinberg - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Rion B. Needs - Chief Executive Officer, President and Director

Reid E. Simpson - Chief Financial Officer, Principal Accounting Officer, Senior Vice President of Finance, Treasurer and Assistant Secretary

Analysts

David M. Scharf - JMP Securities LLC, Research Division

Sameer Gokhale - Janney Montgomery Scott LLC, Research Division

Hugh M. Miller - Sidoti & Company, LLC

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Michael J. Grondahl - Piper Jaffray Companies, Research Division

Mark D. Hughes - SunTrust Robinson Humphrey, Inc., Research Division

Lawrence Berlin - First Analysis Securities Corporation, Research Division

Edward Paul Hemmelgarn - Shaker Investments, L.L.C.

Asset Acceptance Capital Corp. (AACC) Encore Capital Group's Special Transaction Announcement Call March 6, 2013 9:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Encore Capital Group Update Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Adam Sragovicz. You may begin.

Adam Sragovicz

Thank you, Latoya. Good morning, and welcome to Encore Capital Group's Special Transaction Announcement Call. With me on the call today is Brandon Black, our President and Chief Executive Officer; and Paul Grinberg, our Chief Financial Officer. Brandon will make prepared remarks, and then we will be happy to take your questions.

Before we begin, we have a few housekeeping items. Throughout the call, we will use forward-looking statements including predictions, expectations, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment, these statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today. As a result, we caution you against placing undue reliance on these forward-looking statements, which speak only as of the date they are made. Please be sure to see our Forms 10-K, 10-Q and other SEC filings including the press release issued as an exhibit to our current report on Form 8-K filed today, which include a more complete discussion of our financial results and risk factors that pertain to our business. In addition, this communication does not constitute an offer to sell or the solicitation of an offer to buy any securities.

As a reminder, this conference call will also be made available for replay on the Investor section of our website. And we also plan to post the prepared remarks following the conclusion of this call.

With that, let me turn the call over to Brandon Black, our President and Chief Executive Officer.

J. Brandon Black

Thank you, Adam, and good morning, everyone. I appreciate you joining us on such short notice. Earlier today, we renounced that Encore has reached an agreement to acquire Asset Acceptance Capital Corp. Together, the 2 companies have purchased over 60 million consumer accounts with a face value of more than $130 billion. Under the terms of the agreement, Encore will acquire Asset Acceptance for $6.50 per share, which represents a total equity value of approximately $200 million. Asset Acceptance shareholders will have the option to receive their consideration in cash or Encore stock or any combination of cash and stock at their election with the aggregate stock consideration across all shareholders capped at 25% of a total equity consideration to be received.

Encore anticipates funding the equity purchase and additional assumed liabilities through Encore's current credit facility and existing banking relationships. Subject to shareholder and regulatory approval, acquisition is expected to close during the second quarter of the year.

Depending on the actual closing date, the total size of the acquisition is anticipated to be between $350 million and $400 million. We believe this acquisition marks the beginning of a new phase in our highly fragmented industry, a phase defined by more efficient companies committed to operating ethically and treating consumers with respect. Transactions like this are an important component of our long-term growth plan, along with pursuing growth at new asset classes and geographies.

As we have consistently said, success in our industry depends on 3 factors: an efficient operating platform, access to low-cost capital and a deep understanding of the financially distressed consumer. We have also said that companies that lack these factors will find it difficult to survive in this increasingly competitive environment, particularly as pricing continues to rise. This is the case with Asset as a standalone company.

As we integrate their operations, we believe that our strong operating and cost advantages will allow the portfolio investments made by Asset to be significantly more profitable. We have spoken a number of times about our expectation of industry consolidation as the business and regulatory environments grow more complex. For the past 2 years, we have actively positioned ourselves in this environment, and we believe this acquisition sends a clear signal that Encore will play a key role in driving consolidation in a highly fragmented industry. We have a history of acquiring and managing large portfolios in the resale space.

For example, last year alone, we made 2 significant portfolio acquisitions and have successfully integrated them into our business. We expect to leverage this expertise as we work to integrate Asset into Encore's operations. We believe Asset's portfolios have around $1 billion in estimated remaining collections. And as a result, this transaction will account for a significant portion of our purchasing activity in 2013.

As we've experienced during complicated transactions in the past, integration and absorption could take time and attention, so we'll be devoting a lot of time to ensure we maximize the value of Asset's portfolio. The purchase price of this transaction represents attractive IRRs when compared to opportunities we currently see in the marketplace.

Before we open the line to questions, I'd like to thank Asset's management team for their efforts in bringing this transaction together. We not only believe that it's the right thing to do for our combined shareholders and employees, we also believe it's at the right thing to do for consumers. It allows us to extend to millions more consumers the industry's only Consumer Bill of Rights, which is our commitment to treat people with the respect they deserve as they regain their financial health.

Before we open up the line to questions, I'd like to let you know that I'm in Asset's headquarters in Warren, Michigan, while Paul is at Encore's offices in San Diego. We'll try to be as coordinated as we can while answering your questions.

Operator, please open up the line.

Question-and-Answer Session

Operator

[Operator Instructions] The first question is from David Scharf of JMP Securities.

David M. Scharf - JMP Securities LLC, Research Division

A few things, I guess, Brandon, can you start out by discussing maybe in a little more granularity just operationally what the opportunities are? Obviously, Asset has been around for a while, and a lot of these are aged purchases that they own. What ultimately is going to be done over the next, maybe, 12, 18 months to boost the returns from what you see potentially in the marketplace? Is it just collecting out of India? Are there other factors, can you elaborate?

J. Brandon Black

Well, it's premature to get into the exact operating plan. The transaction certainly has to close. But it's our belief that, first and foremost, our company was actually built off acquiring aged portfolios. If you go back to the history of Encore, the vast majority of what we purchase is the people we call tertiary portfolio, aged portfolio. So this is exactly how we built the company. And our expectation is we'll be able to take the assets that are owned here and use our analytics to better target the work efforts. And then through a combination of being smarter about what we work and where work, we think can both drive more collections at a significantly lower cost.

David M. Scharf - JMP Securities LLC, Research Division

Okay. Just curious, can you walk through whether there are any unique accounting adjustments to sort of level yield accounting for the acquired portfolios? I mean, does anything kind of get restated or in terms of how we ought to think about a blended?

Paul J. Grinberg

Yes, David, well, because of this is an acquisition of a business, we'll be using purchase accounting for the transaction and we will allocate a value to the portfolio. And so this will effectively be treated as, for accounting purposes, that there'll be a very large portfolio that will effectively be put on our books whenever the transaction closes. And that will represent its own pool group, and we will use accretion accounting as we would other types of purchases. So we would expect that the allocation of value of the transaction will mostly be attributed to the portfolio and then that, we'll use accretion and level yield accounting for that. So Asset's historical accretion relate -- as it relates to all of the portfolios that have been acquired over the years will terminate and will start fresh with effectively a new portfolio.

David M. Scharf - JMP Securities LLC, Research Division

Okay, that was my question. So that $370-odd million of purchase receivables that they're showing at year end becomes effectively its own static pool?

Paul J. Grinberg

That's right. At a different amount, but it will be somewhere in that vicinity.

David M. Scharf - JMP Securities LLC, Research Division

Got it, got it. And then lastly, can you just remind us about the turn availability on your bank line and how much additional borrowing would be needed? I realize it's somewhat dependent on the equity component of the transaction price, but give us a ballpark?

Paul J. Grinberg

Yes. So it will be dependent on the equity component. It will also be dependent on our debt levels at closing and Asset's debt level. So today, we have about $230 million, $240 million of availability under our line plus we have our accordion of $180 million. And so between the 2 of those, we will have the capital to effect the transaction regardless of how much -- how many of Asset's shareholders elect to receive Encore stock as opposed to cash.

David M. Scharf - JMP Securities LLC, Research Division

Okay. So the existing facility effectively gets you there. And then lastly, I know kind of absent from your discussion was any commentary on whether, excluding kind of onetime deal-associated costs or any onetime integration costs, you would foresee this being as accretive to 2013?

Paul J. Grinberg

I think a good way to think about that is if you assume that we had a budget to acquire $400 million of assets this year, effectively what we're doing is acquiring that in one very large transaction or purchase. So the timing of that is obviously different than if we were buying steadily throughout the year. But that's in terms of evaluating whether it's accretive or not, that's the best way to think about this. You are correct that there will be some onetime transaction costs, which will start to incur in this quarter's -- various fees and expenses will start incurring. What this allows us to do, as Brandon mentioned, is basically achieve our 2013 purchasing targets and locking them in for the year. And this allows us to accomplish the growth objectives that we discussed in our last call of 15% to 20% annual earnings growth. So this transaction basically allows us to lock in and secure that volume in one transaction, which we feel is important, especially in the pricing environment we're seeing today.

David M. Scharf - JMP Securities LLC, Research Division

Got it. And just one last question. Can you, because I haven't looked through the asset disclosures, and obviously about half of your collections is through the legal channel, more of that is over time going to be in-house legal, but how does that play out with kind of the current channels where -- that Asset is collecting on? Have they taken as much advantage of outsourced legal over the years as you have? And is there an opportunity to bring more of that in-house?

J. Brandon Black

Well, the mix is similar and in fact, they put a lot of effort here at Asset in building kind of unique it internal legal process and so we think the combination of what we're doing and what they built will actually be pretty powerful. So it's about half-half today and there's some building and brick laying that's been done here that we think we'll be able to take advantage of.

Operator

The next question is from Sameer Gokhale of Janney Capital.

Sameer Gokhale - Janney Montgomery Scott LLC, Research Division

Just a couple of questions, so -- and congratulations firstly on this transactions. My first question was it sounds like Asset will be operated as a separate subsidiary of Encore Capital. Is that specifically to kind of cordon off or segregate any litigation or any legal issues that they may be facing from Encore? I mean, is that structurally why that's happening or is there some other reason why it will be operated as a separate subsidiary?

J. Brandon Black

The biggest reason is the accounts are currently being serviced by Asset Acceptance Corp., it's a licensed collection entity and changing -- servicing and changing the name will just cause a cost we'll need to incur. We will effectively have 2 debt collection subsidiaries and maybe that becomes an advantage for the company as well, but there's no structural reason other than the cost it would take to move everything under Midland.

Sameer Gokhale - Janney Montgomery Scott LLC, Research Division

Okay, that's helpful. And then I just want to clarify on the commentary about the equity because one of the things I'm confused by is it seems like the aggregate stock consideration will be capped at 25% of the total equity consideration to be received. So what I'm unclear on is are you saying that of the total deal amount, 25% -- no more than 25% would be equity or using of the total equity, so they could be other classes or types of equity issued other than common equity in this transaction. So can you just clarify that a little bit, what that exactly means, what's being capped at 25%?

Paul J. Grinberg

So it's if the equity -- the purchase price of $6.50 a share represents about $200 million, the maximum that we would issue in stock will be $50 million.

Sameer Gokhale - Janney Montgomery Scott LLC, Research Division

Okay, got it. So it's at 25% of that, okay. And then lastly, and you did talk about, over time, may be transitioning those accounts from Asset onto your platform, but is there -- and I know you're asked about this earlier, but I mean is there a timeframe we should think about in terms of how that should occur? So it's not going to be from day 1, you'll be transferring those accounts over to India or Costa Rica. But as we think about the earnings benefit from the acquisition and the use of your platform and collections, I mean, would you say it's a year, within a year you'd expect to have those accounts transitioned, is that fair?

J. Brandon Black

So I think, again, speculating on the operating transition is -- it's a little premature. What I would say is we don't have 1,000 employee sitting around doing nothing today, so we're going to need the Asset team to collect on these receivables for a long period of time. I think many of the adjustments will be on strategy and there will be allocation changes, but I wouldn't assume that all the accounts are actually going to move because there's a significant portfolio, you're talking about many billions of accounts and we'll be mindful of cost, but I think that a lot has to be determined.

Sameer Gokhale - Janney Montgomery Scott LLC, Research Division

Okay. And then just my last question, Brandon, I mean in your commentary, you had mentioned that when you made this -- decided to acquire Asset Acceptance, you suggested that the IRRs there were better compared to anything else that was around. But I mean how should we think about -- because I just like to parse that a little bit if that's useful. But I mean are we saying that the IRRs are maybe kind of lower than what you've seen historically? And maybe on a relative basis compared to historical level is not that attractive, they just -- it just happened to be the best sort of thing for you to do in the current environment relative to other types of opportunities. I mean is that fair to say? Or in absolute terms, the IRRs here also are attractive relative to what you've seen historically?

Rion B. Needs

I guess it's somewhere in between. I think what we're seeing is the absolute returns of this transaction are very strong. And certainly compared to today's environment, they're significantly better. Compared to the history of the company, there are times when the IRR has been higher, and then it's been lower, but we think that there's a very strong return in a standalone environment whether it's a good period or a bad period.

Operator

The next question is from Hugh Miller from Sidoti & Company.

Hugh M. Miller - Sidoti & Company, LLC

I was wondering, I think you guys have mentioned, Rion was on the call for this conference call, correct?

J. Brandon Black

He is not. I'm in the office with him but he is not on the call.

Hugh M. Miller - Sidoti & Company, LLC

Okay, I was wondering if you could just talk about -- if you could provide any color whatsoever on kind of the sales process for this deal. I was wondering if -- was this kind of a competitively priced transaction or is this something that kind of you guys just as 2 separate companies have talked about together, any color on that?

J. Brandon Black

I think, ultimately, that process will get disclosed in the proxy -- in the prospectus, sorry. I have Greg Call in here with me telling me exact answer. It's a rather comment exactly, what I would say is that we had very open cordial conversation with the team here. Rion has been spectacular working with us. But rather than going blow-by-blow, just know the 2 companies have worked together to come up with a transaction I think that works for everybody.

Hugh M. Miller - Sidoti & Company, LLC

Okay. And is the -- I'm sorry, do have other comments?

J. Brandon Black

No.

Hugh M. Miller - Sidoti & Company, LLC

Okay. And is the decision to kind of maintain their offices for the current period just given the size of the transactions, that you'll eventually, over time, look to kind of may be more actively hire in India and look to do some consolidation?

J. Brandon Black

Well, again, the reason we have the sites is twofold, one is we need the people. And two is we've always been a company that's been opportunistic when things come up whether that's St. Cloud or Phoenix where we've always found -- where we find great people that add value to the company. We had 300 people a decade ago, we have 3,000 people today. So our expectation is we grow and hopefully, we can find a number of people here, a significant number of people here who can be part of that growth story.

Hugh M. Miller - Sidoti & Company, LLC

Sure. Sure. But, I mean, at the same time, I think you guys have made commentary that typically when you look for a transaction, you're more interested in kind of acquiring the portfolio as opposed to paying up a premium for someone else's franchise, which you've kind of done in the past with a lot of large acquisitions, just acquired the portfolio. I'm wondering why this is kind of a little bit different than some of those other deals.

J. Brandon Black

I think the methodology is the same when we factored in the costs to collect. We factored in the cost of maintaining sites that are in existence. So that -- we fully expected that we would need to maintain the operating sites and we factored that cost in the transaction but the methodology and the thought process is no different. We view this as acquiring a very large portfolio in a very attractive return and we'll achieve that partially by working with the teams that are in place today.

Hugh M. Miller - Sidoti & Company, LLC

Okay. And as you guys threw out some figures with regards to purchase price all-in following the operations in the fourth quarter, somewhere between $350 million and $400 million, and then $1 billion in ERC will get you to purchase price multiples somewhere around 2.7x, is that kind of how you guys were looking at the transaction?

J. Brandon Black

The one thing that -- in the $1 billion, is there will be some of that will be collected between now and closing, so you'd have to reduce the total collections by any that's collected between now and then to get the right multiple, but that's the way to think about it, but it's not as high as you've just described.

Operator

And the next question is from Bob Napoli of William Blair.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

You guys have been working awful hard, but you have a lot of work in front of you but nice to see the industry consolidate and industry player [indiscernible], if you will. The question, the Asset has some very high cost debt. What is -- when can you prepay that? And what kind of fees would be associated with the prepayment of the -- do you expect to close -- to pay that debt off right away?

Paul J. Grinberg

We anticipate to pay that off at closing. And all of the fees in connection with that have been reflected in the numbers we discussed, so there's a small premium that needs to get paid on the term debt but it's not significant.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Okay. And, I guess, what are your thoughts, obviously the cost-to-collect that Encore has been able to drive has been driven in great part because of the India collections, unique India collections capability that you've built. It's tricky obviously to transition collections of portfolios, but you've done it several times, as you mentioned, in the past. Over what time frame, how much of this business do you expect to transition to India over the next year or 2 years to get the cost of collections from Asset into the Encore world?

J. Brandon Black

I think the operable question, the operable point, the one you made Bob, which you mean to get the cost to be more competitive, and our plan will be to do that both by being smarter about how we work things. That's going to be a big component of it and also making sort of operating decisions that allow us to work more efficiently. It is really hard today to say exactly what the timing of that is, but we fully expect the cost-to-collect on this portfolio to mirror our cost-to-collect over a relatively short period of time.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Okay. I mean, obviously, you've got to get there by moving -- by building that India capability, is the -- are you running into any constraints in that market as far as ability to find good people or pricing or cost of the employee base?

J. Brandon Black

Again, let's remember, only about half our call center collections come from India, the other half comes from domestic call center employees. So in our cost, we've got half our collections in the U.S. and we expect to continue to -- again, continue to have the call center we have here in Michigan. And I think again be smarter about it, be smarter about how we allocate things. But the particular question, is we don't have any resource constraints to hire and attract people at any of our operating sites.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Okay. And then just on purchases, I guess, without this acquisition, we were expecting you guys to buy about -- I mean, I think, most people were looking for you to buy $400 million to $500 million worth of paper in '13. I mean, essentially you got that with this acquisition, so should we -- I mean, what are your thoughts around organic portfolio acquisitions or flow? And are there locked inflows that Asset has? What should we expect besides the portfolio purchase for new purchases for the Encore/Asset combined company?

Paul J. Grinberg

I think like we've done in prior years, we're likely to give the exact purchasing forecast for the year in our June shareholder meeting. I think we should expect in the interim, between now and closing, is that both companies continue to purchase. The Encore level is likely to be at a lower run rate than it has been in the past as we gear up for this. And so I think the forecast combined purchasing for the year we'll give in June, but it's likely to be kind of in the higher end of the range you've talked about earlier.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Higher end of the range, including the acquisition -- with the acquisition of Asset?

Paul J. Grinberg

Absolutely.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

So you'd be buying the -- I mean, just to be clear, I mean, $450 million of Encore purchases plus the purchases from Asset?

Paul J. Grinberg

No, no. If your number is $450 million, you would take $450 million subtract out the Asset transaction and come out with a number. I'm not giving you the number, that was your number. And my guess is slightly higher than that but it's not going to be $800 million.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Okay, all right.

J. Brandon Black

Bob, once the transaction is closed, we're likely not to spend much money on purchases for a while as we absorb this.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Okay. And then last question. Asset was very excited about a bankruptcy business that they were building, and I don't know if you've had time to review that and what your thoughts were on the debt services business, if you would, if you've taken a look at that? And if you would -- if you had thoughts on growing that business or not?

J. Brandon Black

We had taken a high-level look at that business. Obviously, it's in early formation stages. Look, we think that, that's a business that can grow, it's something we will do and we'll get to know that a little bit better. We are in a tough environment where taking on third-party relationships is a challenge but there's been a lot of work done here. If it's the right thing to continue it, we'll absolutely do that.

Operator

The next question is from Mike Grondahl of Piper Jaffray.

Michael J. Grondahl - Piper Jaffray Companies, Research Division

The first one is really you're obviously leveraging your low operation costs. Can you kind of talk about 1 or 2 metrics that you think are reflective of your low cost and kind of how that compares to the cost at Asset Acceptance? And then secondly, just what do you see is your debt financing cost and compare that to Asset's financing cost?

J. Brandon Black

I'll let Paul answer the first one, I'll answer the second one. In terms of -- I'm not sure of the exact right metric. Ultimately, there are 2 metrics that matter, how much you collect and what it did cost you to collect it. And we think we're going to be able to improve both of those numbers as it relates to kind of historical Asset Acceptance performance. We believe we will collect more in the portfolio that is in currently owned and we'll do it less expensively. And I think those are the 2 measures that are important. It will be hard for you to isolate that in our reporting going forward, but it's our fundamental belief that we often, in a lot of these calls have been around, are the cost-to-collect, that's one piece of the puzzle, but how much you collect is potentially more important. And our belief is that our analytics ability to penetrate more broadly, the tools that have been developed here is just going to allow greater portfolio liquidation over time and we'll get the cost benefit as well. Paul, you answer the financing cost.

Paul J. Grinberg

Sure. So our -- we expect to fund this through our credit facility, which is at LIBOR plus 3 -- 2.75 right now. And Asset's all-in interest cost between the term and the revolver is closer to 10%. So there'll be a significant reduction in interest cost.

Michael J. Grondahl - Piper Jaffray Companies, Research Division

Right out of the gate, okay. And then secondly, you guys noted in the press release that you are extending your Consumer Bill of Rights to, it looks like all of Asset Acceptance's collection customers, if you will. What were they doing in the past and how did you get kind of comfortable you're not acquiring any potential liability there?

J. Brandon Black

I think that statement is more just an affirmative statement that we expect that we'll take that Bill of Rights and take it across Asset's operations. Interestingly, I think they've put in a lot of work and effort over the past few years, really since Rion got here to have really tight, really buttoned up processes and to make sure that they've got policies in place. Many of you are aware of the FTC matter that goes back now 5 or 6 years, I think that they worked through. And so we feel very comfortable with the process that we have put in place here. They don't have it, a Bill of Rights, we do and so that's why I put the statement in place.

Michael J. Grondahl - Piper Jaffray Companies, Research Division

Okay. And you're comfortable you're not acquiring any liabilities for past collection practices or anything?

J. Brandon Black

I think it's a matter of law. We are acquiring past liabilities. We don't know of any that are material sitting here today. But anything that would have happened in the past would be something we would be -- we would have to deal with.

Operator

The next question is from Mark Hughes of SunTrust.

Mark D. Hughes - SunTrust Robinson Humphrey, Inc., Research Division

The carrying value for the portfolio is about $350 million in Asset Acceptance. Paul, I think you said the majority of the purchase price would be receivables balance. Could you sharpen that up a little bit? Do you think it will come in at about $350 million? If you think you're going to collect more, could there be potentially a gain depending on the purchase price?

Paul J. Grinberg

So the allocation of the purchase price of the portfolio, one, it's going to be dependent on ultimately what the purchase price is, which will be dependent on the debt levels at closing, which we anticipate to be 45 or 90 days or so from now. So a lot of it is really going to be dependent on that, but if it is between $350 million and $400 million, as Brandon described it, the bulk of the purchase price will get allocated. It's tough now 2 to 3 months before a deal closes though to really pinpoint it any further than that.

Mark D. Hughes - SunTrust Robinson Humphrey, Inc., Research Division

Is there any reason to think that their carrying value was too high. If you look at the books, do you think that the $340 million at least as far as their projections went was a reasonable number?

Paul J. Grinberg

I think their carrying value was based upon their estimates and models that's gone through a lot of scrutiny from audit firms, their financials are audited. So I wouldn't say anything other than based on all that, their carrying value was, I'm sure, appropriate for their operations and their expectations of collections.

Mark D. Hughes - SunTrust Robinson Humphrey, Inc., Research Division

And then how quickly should we assume, you've talked about costs should be nearer yours or your historical numbers in the short period of time, would that be at the end of this year, say, fourth quarter costs should be your level?

Reid E. Simpson

Again, I think it's a function of when the transaction closes. But I think in a hypothetical case, we think within 9 months, the cost-to-collect would be where our cost-to-collect is.

Mark D. Hughes - SunTrust Robinson Humphrey, Inc., Research Division

And then do you have any requirements in terms of debt repayment that are -- would constrain you once this transaction is complete? Will it be some period obviously of digestion but any requirements to reduce your debt ratios?

Paul J. Grinberg

No. After the transactions, we'll be well within our covenants and there won't be a need to reduce debt because of constraints like that.

Operator

And the next question is from Larry Berlin of First Analysis.

Lawrence Berlin - First Analysis Securities Corporation, Research Division

Just have a couple of smaller questions. One is Asset Acceptance had been working on their own platforms both here and they do have big Indian or some Indian operations. Do you see any hiccups in transiting them to ox [ph] their own platform or do that to continue it onto your platforms over time, obviously not on the short run. And then what do you plan to do with their Indian efforts at this point?

J. Brandon Black

Right now, it's business as usual here at Asset. They've got a business to run and those relationships will stay in place and continue running. And again, I think when it gets closer and there's a reason for us to start thinking about what exactly to do, we'll do that. They have spent a lot of time building their technology platform that we're keenly interested in understanding and different relationships in India that we're also keenly interested in understanding. So I think there will be an evaluation period where we understand that a bit more but for now, the company will run exactly as it runs today.

Lawrence Berlin - First Analysis Securities Corporation, Research Division

Okay. And then the other question is on they had a legal platform that they were just deploying and beginning to sell a software that they were very high on, and I think you guys have looked at and thought was good. Do see the ability to -- use it to cap your own cost on legal as you bring stuff more internal on legal?

J. Brandon Black

That's -- our hope is that the technology investments that have been made here will help accelerate our internal legal efforts. Asset actually had been doing internal legal before we had, so they've been spending a fair amount of time developing the software that will both allow the servicing business that some of that is earlier, as well as internal business. And it's one of the things we're really interested in getting to know better.

Operator

[Operator Instructions] The next question is from Edward Hemmelgarn of Shaker Investments.

Edward Paul Hemmelgarn - Shaker Investments, L.L.C.

Just one question is more about you've always talked in terms of your collection process about your efficiencies or the strength of determining what account to collect when. I'm assuming that -- or how would you evaluate Asset Acceptance's capabilities in that area relative to Encore's? And would you -- do you think that's something that you'll be able to bring some improvements to immediately?

J. Brandon Black

I know the talented team up here whose job is to focus on that, don't know them well enough now to know how well they do individually. But I can say is we think that's a strength we're going to bring this transaction. We think we know these consumers incredibly well. We think our models will be very predictive. We have the ability as part of it to get a complete view of the account level of the portfolio, so we know who these consumers are, where they originated, how much they've collected so far. And so that complete view gives us the confidence in our models and our ability to come in and make changes that may drive some near-term results.

Edward Paul Hemmelgarn - Shaker Investments, L.L.C.

Would you ever contemplate just operating one platform to drive that as opposed to maintaining both Encore's and Asset Acceptance's?

J. Brandon Black

I think that's a in-the-future question and based on which solutions are best and we'll pick the best of both.

Operator

Thank you. There are no further questions in the queue at this time. I'll turn the call back over to management for closing remarks.

J. Brandon Black

Once again, thanks to everybody for joining us in such short notice, and we'll talk to you on our first quarter earnings call. Thank you very much.

Operator

Ladies and gentlemen, this concludes today's program, you may now disconnect. Good day.

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