(Debtwire) Intrum delivers strong Servicing EBIT margin as haircut to reduce debt burden
28 Jul 2025 | 15:15 BST
EUR 526m new-money notes issued, with 10% debt haircut implemented
Net leverage ratio 4.8x at 2Q25, expected to decrease by FY26
Intrum’s Servicing segment margin performance is encouraging. A debt haircut will also reduce the company's net leverage despite fee outflows, according to an independent analyst and three buysiders.
The Sweden-based debt collector on Friday (25 July) reported 2Q25 results and held an earnings call. Intrum management, led by President and CEO Andres Rubio and CFO Johan Akerblom, told investors that Servicing adjusted EBIT margins ares expected to keep growing, with a 25% target sustainable, while the roll-out of AI-debt resolution service company Ophelos is gathering pace.
The company's recapitalisation was completed on 24 July as it exited a Chapter 11 process.
Intrum’s recapitalisation involves a reduction of RCF commitments to EUR 1.1bn from EUR 1.8bn and extension of the RCF maturity to June 2028. New capital will also be injected through the issuance of new senior secured 1.5 lien new money notes of EUR 526m with a 2027 maturity. Existing senior unsecured notes will be amended and 90% exchanged for new secured notes with 10% equity for the remainder. There will be a pro-rata tender offer for EUR 250m of the exchange notes within 60 days following completion.
The new 1.5 lien new money 2027 notes are indicated at 102.625-mid on IHS Markit.
S&P upgraded the issuer credit rating to CCC+ from D on 24 July and notes the new-money notes are viewed as leverage-neutral because the proceeds are to be held in escrow and are only to be used for exchange note buybacks, with any cash left after 12 months being used to redeem new-money notes.
Moody’s on 25 July assigned a B3 rating to the new-money notes. The agency noted the recapitalisation involved a hive-down where existing debt is transferred to a new debt issuance entity Intrum Investments and Financing AB, which is a direct subsidiary of parent Intrum AB. The company's assets, functions, contracts and employees are also transferred to the new entity Intrum Group Operations, a direct subsidiary of Intrum Investments and Financing. A security package has also been put in place, which pledges shares, as well as certain assets of the operating companies as transaction security related to the debts of Intrum Investments and Financing, Moody’s noted.
“It is just out of a restructuring transaction when investors never trust too much the results before and after the completed recapitalisation,” one buysider said. “There is nothing to be excited about for the time being. Of course, if you are an existing bondholder, it will be necessary to sit tight and wait for better financial performance.”
A second buysider stated the 1.5 lien paper is probably going to be fine, but the company will not delever much with the recapitalisation and the second lien debt could be dicey.
How much for a haircut?
Source: Intrum 2Q25 investor presentation
Intrum management received investor questions on the 2Q25 earnings call about fee outflows (which are to be paid by the company to banks as well as both company and creditor advisors according to management) as part of the recapitalisation, and it was explained that advisory fees were below 3% of the roughly SEK 49bn debt structure. Management added that the SEK 2.1bn transaction costs had not yet flowed through the company's P&L and that the restructuring is tax deductible.
Bondholders formed two separate groups after Intrum appointed Houlihan Lokey and Milbank as restructuring advisors in March 2024. The cross-curve group were advised by PJT Partners and Latham & Watkins. A group of mostly front-end bondholders were advised by Lazard and Weil, Gotshal & Manges.
“We think a second restructuring is possible. The problem is the price is too high for us to enter the new bonds, and we don’t think there is an effective market to short this. The restructuring didn’t do much and the amount of debt reduced was (around 10% haircut) was not worth the time and fees spent. The business still has too much debt and performs as badly as before,” a third buysider said. “Nothing was achieved, and the only improved outlook factor is that ECB interest rates are lower than a few years back. Atos cut debt and put in new money and was a proper restructuring. Even TalkTalk reduced its debt meaningfully, Standard Profil also cut a good amount of debt.”
Deleveraging from here
Intrum management reaffirmed the company's 3.5x net leverage target to be achieved by the end of 2026. The net leverage ratio rose 0.3x sequentially to 4.8x at 2Q25 as disposed businesses rolled off the LTM EBITDA calculation. The current 4.8x net leverage ratio was described on the 2Q25 earnings call as a structural high point, as the recapitalisation will bring it down in 3Q25 and the ratio can then improve in the coming quarters.
The company delivered FY24 cash EBITDA excluding discontinued operations of SEK 9.287bn but faced roughly SEK 2.064bn annual capex, net interest paid of SEK 3.308bn, SEK 860m cash taxes, and SEK 229m lease payments, which meant rough estimates of SEK 2.826bn of free cashflow ahead of working capital swings based on company financial statements.
S&P noted the current investment level of below SEK 2bn per year is well below the level needed to replenish estimated remaining collections (ERCs). This will allow Intrum to be cashflow generative in the near term and reduce gross debt, but will mean a drag on future revenue generation. S&P noted that if collection performance is constant and Intrum invests SEK 1.5bn this year and SEK 2bn annually afterwards in new portfolios, then ERCs will still decrease before stabilising in around four to five years.
“It is too early to say Intrum is performing well and can serve its debt stack in the future. The company is investing less in new portfolios at this moment, and this is going to affect the business model as we knew over several years,” the first buysider said. “It is a transformation process that will take several quarters to achieve the expected results. The company remains cash flow negative and it is one notch more levered than it should be. The debt is not a bargain, and I would prefer to wait more than one quarter to appreciate the earnings evolution.”
Intrum operates two main large business segments, including its Servicing and Investing operations. Servicing involves credit management with a focus on late payments and collections. Investing involves investments in portfolios of overdue receivables and similar claims, after which the Intrum Servicing operations collect on the claims acquired.
Servicing adjusted EBIT margins in 2Q25 rose to 24% versus 17% at 2Q24. Investing collection performance in 2Q25 was up at 106% and 112% versus active and original forecasts.
Intrum continues to roll out Ophelos, which is the only autonomous debt resolution platform in the market. It launched Ophelos in Portugal and Italy in 2Q25 and the platform is live in eight markets. Ophelos is expected to be implemented in markets covering nearly 60% of commercial activity by the end of FY25 and this will be a material run-rate earnings driver in FY26. The company also launched AI voice agent Olivia in Spain during 1Q25.
The company continues to work with Cerberus on its capital-light strategy which means investments can be scaled without increasing debt, generating a return on investment but also driving new investment management fees and increasing servicing income. Intrum has jointly invested in 17 deals worth SEK 2.753bn to date, according to the 2Q25 investor presentation.
“We’ve been positively surprised by the cost-cutting discipline and this improvement was not down to window-dressing,” independent special situations desk Sarria told Debtwire. “These are positive developments, but the purchasing gross money multiples need to remain high. The servicing margin is performing as forecast. Intrum is a smaller company now trying to service the same cost of debt that the bigger company couldn’t in the first place.”
The third buysider added that the only positive is the servicing margin. The EV/EBTIDA for this business is low-single-digit and distressed investors like Arrow bought French debt purchaser iQera and UK-based debt purchaser AnaCap (AFE) relatively cheaply, so the buysider was unsure a high multiple would be achieved. They added that the recovery would depend on collections, which are not great.
Intrum is listed, with the largest shareholder at 2Q25 being Nordic Capital with a 20.76% stake, according to the company’s financial report. The Intrum share price is up 90% in the past six months, leaving a SEK 7.5bn market capitalisation.
A 25 July Arctic research note placed a sell recommendation on the equity. The note stated there was a clean and margin-led beat driven by servicing, while investing operations were still soft but supported by lower costs and strong joint venture income. The analyst note added that the leverage uptick was expected as the 2024 portfolio sale rolls off, and with the recapitalisation now complete and execution tracking well, there is upside risk to 2026 EBIT estimates if current cost discipline is sustained.
Intrum leverage remained well above its 3.5x FY26 target as soft 2Q25 results were expected. But future coupon income for bondholders after its debt restructuring can be good, with limited downside risk and a decent yield appearing versus sector peers such as Italy-based debt management company doValue. This meant the company’s bonds as well as equity were a near-term hold, according to a 9 July Debtwire report.
European high-yield debt purchaser and financial sector credits offer a number of post-restructured capital structures with an attractive cash price. But caution was warranted on many credits, according to a 21 July Debtwire report.
The Intrum 2Q25 capital structure is broken down below (seeDebtwire analyst calculations).
Houlihan Lokey declined to comment. Intrum and Milbank did not respond to a request for comment.
by Adam Samoon, Jou Yu and Priyanka Kotadia