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Intrum Curve Steepens On Investment Portfolio Disposal

FINANCIALS SECTOR


  • Intrum AB is selling a portion of its investment portfolio including over 10,000 portfolios with a nominal value of SEK 382bn (EUR 33bn) and a book value of SEK 11.5bn (EUR 1.0bn) as of 9M23.
  • Intrum will retain a 35% ownership in the purchasing entity and a minimum 5-year exclusive servicing agreement.
  • Net proceeds of SEK 8.2bn from the sale will be used entirely for debt reduction, decreasing net debt from SEK 58.9bn to SEK 50.7bn.
  • Intrum's net leverage ratio is expected to be 4.6x, with a pro forma cash EBITDA ~20% lower in 2024 while the deal will see a non-cash accounting loss of SEK 845mn.
  • We still view the deal as credit positive and supportive of ST liquidity – DDIS shows over SEK 16bn in maturities for 2024 against SEK 11bn in undrawn RCF and SEK 3.5bn in cash so the use case for the proceeds is clear.
  • Intrum’s shortest dated EUR bonds have rallied on the news (as expected) though bonds maturing beyond 2026 have sold off by more (EUR 28s -€2.54 to €90.83). Equity is 7% lower on the day.
  • Fitch downgraded Intrum (B1[S]/BB[N]/BB-[S] in Sept after management delayed it’s deleveraging target of 2.5x-3.5x to end-2025 and noted that Fitch-adj GD/EBITDA (5x) and ICR (3.1x) were at the lower end of the B and BB rating categories respectively.
  • Deal completion expected in H1, FY results come on Thursday.
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