The downgrade is due to Fitch’s belief that the Swedish group, a leader in the European debt purchase and third party servicing market, has not made sufficient progress in 2023 towards its stated goal of reducing its debt. The company now expects to achieve this goal only by 2025, a timeline that is beyond Fitch’s outlook.
Intrum has a high level of financial leverage despite maintaining a prominent position in the European debt buying and servicing market. However, the group has recently redesigned its strategies with a particular focus on reducing investments in the acquisition of non-performing loan portfolios, exiting from smaller markets, and disposing of parts of portfolios or segments thereof. These new strategies, requiring fewer investments and corresponding debt reliance, should support deleveraging efforts.
Another significant aspect of the new policies pertains to dividends. In the past, dividends have been relatively high, further negatively impacting the achievement of deleveraging objectives. In upcoming fiscal periods, dividends will be paid only if the net financial leverage ratio is 3.5x or lower.
Lastly, Fitch’s assessment takes into account ESG (Environmental, Social, Governance) considerations, with a moderately negative impact on the rating due to the company’s financial transparency. Intrum has an ESG score of ‘4’ for financial transparency, primarily due to the models used for assessing the credit portfolios to be acquired and the Estimated Remaining Collection (ERC). However, as this is a characteristic of all industry players, it has only a moderately negative influence on Fitch’s evaluations.
Managing Director of Credit Village, Roberto Sergio has more than 20 years of experience in NPL and distressed debt in the Italian and International market. He is the editor of the NPL column in Credit Village Magazine and the director of Credit Village's National NPL Market Observatory.