UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934 (Amendment No. __)
|
ASTA Funding Inc. |
|
(Name of Issuer) |
|
Common Stock, par value $0.01 per share |
|
(Title of Class of Securities) |
|
46220109 |
|
(CUSIP Number) |
|
Bruce Hayek, 3047 Fillmore Street, San Francisco, CA 94123 - 415-800-8212 |
|
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) |
|
April 21, 2020 |
|
(Date of Event which Requires Filing of this Statement) |
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [X].
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See 240.13d-7(b) for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
SCHEDULE 13D
|
CUSIP No. |
641119 102 |
|
1 |
NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) |
||
|
RBF Capital LLC |
|||
|
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* |
||
|
(a) [ ] |
|||
|
3 |
SEC USE ONLY |
||
|
4 |
SOURCE OF FUNDS (See Instructions) |
||
|
PF |
|||
|
5 |
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) |
||
|
[ ] |
|||
|
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION |
||
|
State of Delaware |
|||
|
NUMBER OF |
7 |
SOLE VOTING POWER |
|
|
583,198 shares of common stock |
|||
|
8 |
SHARED VOTING POWER |
||
|
|
|||
|
9 |
SOLE DISPOSITIVE POWER |
||
|
583,198 shares of common stock |
|||
|
10 |
SHARED DISPOSITIVE POWER |
||
|
|
|||
|
11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON |
||
|
583,198 shares of common stock |
|||
|
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) |
||
|
[ ] |
|||
|
13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) |
||
|
8.8% |
|||
|
14 |
TYPE OF REPORTING PERSON (See Instructions) |
||
|
CO |
|||
Item 1. Security and Issuer
Common Stock
ASTA Funding Inc.
210 Sylvan Ave., Englewood Cliffs, New Jersey 07632
Item 2. Identity and Background
RBF Capital LLC
3047 Fillmore Street, San Francisco, CA 94123
N/A
N/A
N/A
N/A
Item 3. Source and Amount of Funds or Other Considerations
Ordinary course of business, investments and trading, $5,331,002 cost basis.
Item 4. Purpose of Transaction
The Reporting Person purchased the Shares based on the Reporting Person's belief that the Shares, when purchased, were undervalued and represented an attractive investment opportunity. Depending upon overall market conditions, other investment opportunities available to the Reporting Person, and the availability of the Shares at prices that would make the purchase or sale of the Shares desirable, the Reporting Person may endeavor to increase or decrease its position in the Issuer through, among other things, the purchase or sale of Shares on the open market or in private transactions or otherwise, on such terms and at such times as the Reporting Person may deem advisable.
The Reporting Person has been a shareholder of the Issuer since 2011, and believes the proposed take-private transaction for the Issuer at a purchase price of $11.47, put forth by Gary Stern, the Issuer's Chairman and Chief Executive Officer, and Ricky Stern, the Issuer's Senior Vice President (and together with certain family investment vehicles its majority and controlling stockholder, the "Stern Group"), grossly undervalues the Issuer. The Reporting Person had a telephonic meeting with the Chairman and Chief Executive Officer as well as the Chief Financial Officer of the Issuer on April 17, 2020 expressing its views in this regard. On April 20, 2020 the Reporting Person sent a letter to the Board of Directors of the Issuer (the "Letter") further expressing its views on the undervaluation inherent in the proposed take-private and stated its intention to vote against the transaction in its current form. The foregoing description of the Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the Letter, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The Reporting Person has communicated with, and may in the future communicate with, the Issuer's management and Board of Directors about, and may enter into negotiations with them regarding, the foregoing and a broad range of strategic alternatives and may in the future communicate with other shareholders or third parties regarding the Issuer. The Reporting Person currently has no plans or proposals to, but reserve the right to, effect transactions that would change the number of Shares they may be deemed to beneficially own.
The Reporting Person has no present plan or proposal which would relate to or would result in any of the matters set forth in subparagraphs (a)- (j) of Item 4 of Schedule 13D except as set forth herein. The Reporting Person may in the future take one or more of the actions described in subsections (a) through (j) of Item 4 of Schedule 13D and may discuss such actions with the Issuer's management and the Board of Directors, other stockholders of the Issuer, and other interested parties.
Item 5. Interest in Securities of the Issuer
(a) 583,198 shares of common stock, 8.8%
(b) 583,198 shares of voting power
(c)
| Date | Action | Total Quantity | Total Price |
| 03/09 | BOUGHT | 22,204 | 9.40 |
| 03/10 | BOUGHT | 2,239 | 9.50 |
| 03/11 | BOUGHT | 16,299 | 9.40 |
| 03/12 | BOUGHT | 1,400 | 8.60 |
| 03/16 | BOUGHT | 11,945 | 8.70 |
| 03/17 | BOUGHT | 124 | 8.65 |
| 04/09 | BOUGHT | 76,244 | 11.01 |
| 04/09 | BOUGHT | 22,000 | 11.00 |
| 04/13 | BOUGHT | 30,743 | 11.10 |
(d) N/A
(e) N/A
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
Item 7. Material to Be Filed as Exhibits
See Exhibit 99.1
Signature
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
|
April 21, 2020 |
|
|
Dated |
|
|
/s/ Richard Fullerton |
|
|
Signature |
|
|
Richard Fullerton, President |
|
|
Name/Title |
|
The original statement shall be signed by each person on whose behalf the statement is filed or his authorized representative. If the statement is signed on behalf of a person by his authorized representative (other than an executive officer or general partner of this filing person), evidence of the representative's authority to sign on behalf of such person shall be filed with the statement, provided, however, that a power of attorney for this purpose which is already on file with the Commission may be incorporated by reference. The name and any title of each person who signs the statement shall be typed or printed beneath his signature.
Attention: Intentional misstatements or omissions of fact constitute Federal criminal violations (See 18 U.S.C. 1001).
Exhibit 99.1
|
RBF Capital LLC |
April 21, 2020
The Board of Directors
c/o Gary Stern, Chairman and CEO
Asta Funding, Inc.
210 Sylvan Ave.
Englewood Cliffs, New Jersey 07632
Dear Asta Funding, Inc. Board of Directors:
RBF Capital, LLC currently owns approximately 8.8% of Asta Funding, Inc. ("ASTA"). We purchased our initial stake in 2011 and have added to our position over the years. Outside of the Stern family, we are the largest shareholder.
We are writing to express our strong objection to the 'Going Private Transaction' announced Thursday, April 9th, by Gary Stern (Chairman and CEO), Ricky Stern (Senior Vice President), and related family investment vehicles (the "Stern Group") . A buyout at $11.47/share grossly undervalues ASTA. The offer constitutes a large discount to tangible book value, an even larger discount to adjusted book value, and an enormous discount to the intrinsic value of the business. It even represents a discount to liquidation value.
As of ASTA's most recent 10-Q filing, we calculate ASTA's tangible book value (stockholder's equity less goodwill) was $88.7 million; with only 6.57 million shares outstanding, this equates to $13.50/share. Importantly, the vast majority of ASTA's balance sheet consists of non-operating assets which are liquid and unencumbered.
ASTA's adjusted book value is even higher. The 2019 10-K filing, Note 19, reveals that the fair value of ASTA's receivables portfolio is $25.8 million, some $24.1 million higher than the $1.7 million reflected on its balance sheet. Truing this up translates to an adjusted book value of $112.8 million, or $17.17/share (which is itself conservative, given that management applied a 20% discount rate).
ASTA has the cleanest, most liquid balance sheet we have seen in a public company. The vast majority of assets are cash-like, or easily converted to cash. As of 12/31/2019, ASTA had $60.6 million in U.S. Treasury bills, $8.2 million in equities, and $3.2 million in cash, relative to just $2.3 million in total liabilities (including taxes and leases). This makes book value calculations highly relevant for assessing ASTA's bare minimum value. Were ASTA's businesses simply sold, or run off, the proceeds would far exceed the Stern Group's $11.47/share buyout price.
Yet liquidating ASTA makes no sense, given its history of profitability, the quality of its businesses, and the evolving economic environment that plays directly into ASTA's core strengths. ASTA's intrinsic value clearly exceeds its $17.17/share adjust book value, because:
1. ASTA is a good business that generates strong returns on employed capital and return on equity, especially when adjusted for sizable non-operating assets held on the balance sheet.
|
RBF Capital LLC |
2. Over the past 15 years, ASTA has generated roughly $88 million in net earnings, including $7.2 million last year. This is after all taxes and expenses, including considerable public company compliance, audit, and filing costs.
3. ASTA's business generates strong free cash flow, with high cash conversion. Its businesses require little investment in property, plant, equipment, or inventory. This not only provides ASTA with high returns on employed capital, but also enables the firm to return excess cash to its owners, in the form of stock buybacks and dividends. Over the past 10 years, ASTA has bought back nearly 60% of its outstanding shares, and paid out roughly $40 million in dividends.
4. ASTA's core Consumer Receivables business, with profitable operations in South America, produced segment profits of $12.4 million in 2019 and $17.8 million in 2018. As a testament to its value, this business is generating strong income despite its small balance sheet investment.
5. ASTA owns a collection of attractive fee-based businesses. The Personal Injury Claims business, Arthur Funding LLC, produced segment operating profits of $2.2 million in 2019 and $1.1 million in 2018. The Benefit Advocacy businesses, GAR and Five Star Veterans Advocacy, produced segment operating profits of $1.5 million 2019 and $1.1 million in 2018. These fee-for-service niche businesses have significant runways for future growth with strong economics. Collectively, they are worth high multiples of operating profits.
6. ASTA's expertise in evaluating credit portfolios for purchase, and understanding consumer behavior, confers significant value, especially during economic downturns. ASTA's largest core business is counter-cyclical, and well positioned for growth and profitability. Likewise, the niche, fee-based businesses are well-positioned, as they facilitate critical cash payments to senior citizens and veterans who are rightly owed.
7. ASTA could pay out another massive cash dividend to shareholders, while continuing to operate its lucrative, cash-generating businesses. We calculate this cash dividend could be as high as $10/share.
Using conservative assumptions, we believe the intrinsic value of ASTA's operations are at least $35 million, or $5.30/share, incremental to ASTA's $17.17/share adjusted book value. As such, the Stern Group's $11.47/share buyout price is 33% below adjusted book value, and at least 50% below intrinsic value.
ASTA is an unusual situation, given the abjectly low stock price relative to its value, at the time of the offer. Importantly, this has nothing to do with the integrity of its balance sheet or businesses. ASTA management apparently agrees, buying back 60% of shares over the past decade and more than doubling their family ownership to 63%. As a point of reference, prior to the 2009 financial crisis, ASTA's stock price reached a market capitalization of over $600 million, and routinely traded above two times book value. Today, the Stern Group's buyout offer is at a $75 million market capitalization, and a discount to book value. While the $11.47/share offer is above the depressed stock price, it falls well short of value.
|
RBF Capital LLC |
As patient long-term shareholders of ASTA for nearly a decade, we want to be treated equitably in any go-private transaction. In our 30 years of investing, we have never seen a U.S. public company get bought out for less than tangible book value, or for that matter at such an observably wide discount to intrinsic value.
We appreciate that Gary and Ricky Stern, directly and through controlled entities, own approximately 63% of the company, and are astute at recognizing value. However, if they would like to take ASTA private, it should be at a price commensurate with value; $11.47/share does not come close. We are dismayed that the board would approve an offer that is so patently unfair to minority shareholders. We intend to vote against the transaction under its current terms.
In response, we are changing our SEC filing to a 13-D, and have attached this letter to that filing.
We are available to discuss our objections with the board, management, and other interested stakeholders. We are also open to constructively engaging with management and the board to help explore a range of strategic alternatives which better serve to maximize shareholder value.
Sincerely,
RBF Capital