1st Credit secures £20m second round funding from Gresham and Barclays

1st Credit, the fast-growing consumer debt purchase and collection business, today announces it has secured £20m second round funding from Gresham, the regionally-based UK mid-market private equity house, and Barclays Bank.

Gresham structured and arranged the £15m of development capital funding for 1st Credit in January 2002; this second funding round brings Gresham's total investment to approximately £10m.Mike Henebery and Neil Scragg led the deal for Gresham.

Gresham's investment in 1st Credit follows its previous backing of Mike Cleary, 1st Credit's CEO, who founded debt collection agency CCI in 1992 and led a £4m management buy-out of the firm in 1997 with Gresham's backing; the business was subsequently successfully sold to Equifax in 1998. 1st Credit has an experienced management team including finance director Najib Nathoo, previously main board risk management director at GE Capital and marketing director Charles Holland, previously director of insurance brokers Johnson Higgins.

The market for debt purchase in the UK is growing rapidly and is relatively immature, particularly compared to the US, where over US$27bn of consumer debt is traded annually.

In debt purchase agreements, 1st Credit purchases uncollected consumer debt at a discount to face value from lenders, including banks, credit card companies, utilities and retailers; 1st Credit's expertise lies in the evaluation and recovery of such debt on its own behalf. 1st Credit seeks to purchase debt at an earlier stage in the cycle - sometimes as early as 37 days overdue - to maximise recovery rates and to provide credit corporations with an immediate return on overdue debt.

1st Credit combines debt purchase with traditional debt collection work, in which credit corporations, principally financial institutions and utilities, outsource debt collection to 1st Credit.

From a standing start in April 2001, 1st Credit has successfully grown its turnover, expected to exceed £15m in 2003, and now purchases over £300m of debt face value annually from major financial customers. This figure is estimated to represent approximately 20% of the UK market, although the market itself is growing rapidly.1st Credit's clients include major blue chip financial institutions such as MBNA and RBS.

Mike Cleary, 1st Credit CEO, commented: "We are pleased to have secured Gresham and Barclays' ongoing support for 1st Credit. Debt purchase is a fast-growing market and we are delighted to be at the forefront of this exciting industry in the UK. Gresham's continued support and transaction structuring expertise will enable us to achieve our ambitious growth targets going forward."

Mike Henebery, director of investment at Gresham, said: "Mike Cleary and his management team have achieved an impressive rate of growth since our initial investment in 1st Credit and we are enthusiastic about supporting the company's strong progress in both debt purchase and debt collection. We have backed Mike Cleary in the past with great success and we are confident that 1st Credit will prove to be another highly successful partnership with Mike Cleary and his management team."

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