Research Update: Sweden-Based Debt Collector Intrum Outlook Revised To Negative On Financial Leverage Headwinds; 'BB/B' Ratings Affirmed

Increased operating and financing costs are likely to weigh on Intrum's earnings and could forestall the company's plans to de-lever. Collection management service (CMS) contracts will likely support revenue, but the market conditions on portfolio collections and the timing of financial services nonperforming exposure portfolios up for purchase remain unclear. Although debt is expected to remain relatively stable, its gradual replacement will increase total cash interest expense over the next two years, constraining margins on new portfolio acquisitions. We therefore revised our outlook on Intrum to negative from stable and affirmed our 'BB/B' long- and short-term issuer credit ratings. We also affirmed the 'BB' issue rating on Intrum's senior unsecured notes and kept the recovery rating unchanged at '4', indicating

...- Increased operating and financing costs are likely to weigh on Intrum's earnings and could forestall the company's plans to de-lever. - Collection management service (CMS) contracts will likely support revenue, but the market conditions on portfolio collections and the timing of financial services nonperforming exposure portfolios up for purchase remain unclear. - Although debt is expected to remain relatively stable, its gradual replacement will increase total cash interest expense over the next two years, constraining margins on new portfolio acquisitions. - We therefore revised our outlook on Intrum to negative from stable and affirmed our '##/B' long- and short-term issuer credit ratings. - We also affirmed the '##' issue rating on Intrum's senior unsecured notes and kept the recovery rating unchanged at '4', indicating our expectation of average recovery (30%-50%; rounded estimate: 40%) in the event of a payment default. - The negative outlook reflects that we could downgrade Intrum...

Research Update