Alpha Vulture
Deep value, special situations, long-term horizon, micro-cap

Asta Funding: Accounting Peculiarities Hide Significant Value

Asta Funding (NASDAQ:ASFI) isn't an easy to understand business based on its financials. The company collects distressed consumer receivables (read: bad credit card debt) and they acquired a huge portfolio of consumer debt receivables in 2007. Unsurprisingly this acquisition turned out to be a dud, and since the financial crisis the so called Seneca portfolio has been depressing reported GAAP results. This is however not warranted anymore since the portfolio was financed with non-recourse debt, and while the portfolio has currently a negative GAAP book value, it can't be worth less than zero to the parent. The non-recourse debt, the related interest expenses and impairments on the Seneca portfolio create a dirty window that hides the positive cash...

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