Intrum Mandates Houlihan Lokey and Milbank as Restructuring Advisors as Pressure on Capital Structure Grows

Swedish debt collector Intrum has retained Houlihan Lokey as financial advisor and Milbank as legal advisor ahead of an expected balance sheet restructuring, sources and the company said.

The advisory mandates come as a surprise after the company hosted a credit investor webinar last Friday, March 8, via Nordea, during which it discussed potential funding options to tackle its upcoming maturities wall. Intrum said during the call that it was in contact with its RCF banks, which have been supportive, and added that it received reverse inquiries from private debt providers as well as bondholders willing to support an extension of the notes, sources noted.

While reiterating on the call that 2024 and 2025 maturities can be covered through its RCF and cash - with 8.2 billion Swedish kronor (€711 million) of net proceeds from the recent portfolio disposal to Cerberus fully earmarked to reduce debt - the company appeared to be taking a more holistic approach toward addressing its capital structure, the sources added, reckoning that an extension of the bonds, with a large PIK component, similar to Atalian’s recent deal, or a combination of bond extension and private debt provision could be likely outcomes.

Intrum also said during the call there is still availability of a secured debt basket of around €100 million, with €150 million utilized so far, and that it has super senior capacity of around €1.1 billion.

Investors, however, remained worried about the group’s 4.4x net leverage, which is higher than some of its peers, and are skeptical about the rebound in the servicing business that management has been relying on as Intrum shifts to a capital light investment model, according to the sources. Management failed to explain why it believes that the servicing business should perform better going forward, other than saying that it will be using new technology and cutting costs.

Pro forma the portfolio disposal, Intrum was 4.4x net levered as of end 2023 versus 4.1x a year before, and it has pushed out its 2025 3.5x net leverage target to 2026. The lack of details about the exact nature of the portfolio sold to Cerberus was a significant setback and the company has not yet regained investor confidence, sources noted.

Intrum’s stock price has lost about 80% in the past year with its market cap currently at about SEK 3.13 billion. Nordic Capital is Intrum’s largest shareholder, holding about 32% of voting rights, according to the company’s website. Intrum is listed on the Nasdaq Stockholm Large cap stock exchange.

The group’s €850 million 3% 2027 notes are quoted at 61.5-mid today, yielding about 18%, according to Solve Advisors, while its €450 million 9.25% 2028 bonds are quoted at 71-mid, down over 20 points from around 94-mid at the start of the year.

The bonds have been actively trading in the secondary market, with some distressed debt and hedge funds buying into the notes. Concurrently, some other funds have shorted the bonds, including the shorter-dated ones, as they take a negative view on the company and its refinancing prospects.

The whole debt collector sector has been under pressure due to a number of headwinds, ranging from a subdued supply of nonperforming loans, or NPLs, to inflationary pressures and challenging financing conditions, sources said. The NPL supply trend has recently reversed as highlighted in the second installment of our Debt Collectors Sector Review piece, but increased competitive pressures are undermining returns, with highly levered credits, such as Intrum, struggling to compete with low-levered funds such as Cerberus and Davidson Kempner that can afford to underwrite NPL portfolios at lower IRRs.

Intrum’s capital structure as of Dec. 31, 2023:

Reorg is hosting a webinar on the debt purchasing sector on March 26, in which we will discuss:

• Recent trends in the European debt collector sector, with a focus on key players Intrum, Garfunkelux-Lowell and DoValue;


• Main differences between the key players; and


• Their likely refinancing options given the constraints in their bond covenants.

To register for the webinar, please click HERE.

Intrum declined to comment.