Intrum AB (publ)

The negative outlook on Intrum reflects our view that the company may not reduce gross debt to EBITDA sustainably below 4.0x. In addition, Intrum may further deplete liquidity to finance acquisitions, given an ambitious EPS target by 2020. We note that the current distressed debt-purchasing market environment remains highly competitive and, contrary to our previous expectations, Nordic Capital's 44% stake in Intrum is unlikely to reduce over the next 12 months, which could place additional pressures on our assessment of Intrum's financial risk profile. We could lower the rating over the next 12 months if we expected Intrum's gross debt to adjusted EBITDA to remain above 4x, or funds from operations (FFO) to debt to stay below 20%. We could

...Intrum is the European market leader for distressed debt collection activities in terms of revenue and geographical coverage. Intrum operates in 25 countries, primarily across Europe. The company forecasts about 5.7 billion of estimated remaining collections (ERC) on a 120-month forward basis from March 2019. This is significantly more than the second largest competitor, Lowell, with 3.5 billion. Furthermore, Intrum has a much more diversified profile relative to peers in that it generates about 60% of its income from balance sheet-light payment collection services--CMS--and about 40% from distressed debt portfolio investments....

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