Garfunkelux Holdco 2 S.A.

The negative outlook reflects our view that Lowell could struggle to reduce its S&P Global Ratings debt to EBITDA sustainably below 5x over the next 12 months. We also note Lowell's intention to continue its portfolio expansion materially beyond the portfolio's replacement rate over the same period, and we expect modest liquidity pressure over 2019 and 2020 to add stress to the group's financial position. We could lower our rating over the next 12 months if we see evidence that the group does not have the capacity, or willingness, to deleverage in line with our base case. Specifically, if Lowell looks likely to overshoot our gross debt to EBITDA target range of 5.25x-5.50x in 2019, we would likely take a

...Following a period of rapid, acquisitive expansion, the group is well positioned strategically across its core European markets. Lowell is the second-largest player in our rated universe of European debt collection companies with over ú3 billion estimated remaining collections at March 31, 2019. It focuses on consumer finance debt in well-established, closely regulated markets including the U.K, Germany, Austria, and the Nordics. This leaves the group well-placed to take advantage of the growing pipeline of nonperforming loans (NPLs) across Europe. Following aggressive expansion, leverage remains high for the current rating level in our view. While acquisitive growth has entrenched Lowell's strategic position in the European distressed-debt market, it has led to a significantly levered balance sheet showing ú2.4 billion of debt at year-end 2018 and continuing to grow modestly under our base case. Debt to S&P Global Ratings-adjusted EBITDA sat above 6x for 2018 and, although we forecast...

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