Audax Takes Bet On Consumers Repaying Debt

Audax Group has bought United Recovery Systems LP, a Houston-based company that provides debt collection services for the credit card, retail, and car loan industries and that several years ago got into hot water for overly aggressive collection techniques.

The firm bought the company from Doug Schultz, its founder and CEO, Geoffrey Rehnert, Audax’s co-CEO, told Buyouts. Audax will review add-on acquisition possibilities, but primarily plans to expand the company organically. CIT Group and SunTrust Bank provided senior financing for the deal, which closed Dec. 22 and whose terms were not disclosed. United Recovery Systems represents Audax’s first investment in the debt collection market.

Founded in 1997, United Recovery Systems has more than 1,000 employees working in Houston and Bryan, Texas, Tulsa, Okla., Phoenix and Monterrey, Mexico. Clients include large credit card companies and retailers, and Rehnert expects rising consumer credit card debt to drive the continued growth of the business.

Audax Group heard about the deal through Mark Russell, a director at Kaulkin Ginsberg Company, a Bethesda, Md.-based deal advisory firm that Schultz hired to shop the company. Kaulkin Ginsberg also coordinated a Feb. 2007 deal in which United Recovery Systems bought a Phoenix, Ariz. Call center—with 15,000 square feet and capacity for up to 150 call stations—from Merchants’ Credit Guide Company.

United Recovery Systems ran into legal trouble in 2002, agreeing to pay $240,000 to settle allegations that it lied and used other unlawful methods to collect debts, including speaking with the children of debtors and warning that failure to pay could lead to their arrest, according to press reports at the time. “URS settled these claims back in 2002, many years before we were introduced to the company,” Rehnert said in a statement concerning the lawsuit. “We are confident that URS conducts its business in accordance with the highest compliance standards.”

For Audax, the deal comes out of Audax Private Equity Fund III LP, a $1 billion pool the Boston-based firm closed in May 2007. The fund is now about 50 percent invested.