Intrum - taking profit
All,
Please refer to our updated analysis here.
Taking profit after shares rally back to pre-pandemic levels makes enough sense, but why now? The answer may lie in the size of Nordic Capital’s stake. It’s not something that can easily be sold at once, nor may that be the ultimate aim. But as the market for consumer NPLs is going through its motions there may only be another year or so before post-pandemic supply comes through. Moreover, inflationary pressures are starting to appear and rising interest rates should primarily hurt debt collectors.
Leverage:
The market is only half knowingly using a flawed metric of Cash EBITDA to calculate leverage multiples. That ignores the expenses these debt purchasers incur on replenishing their books, and more importantly their leverage (replenishment rate generally higher to maintain cash flow). While debt purchasers are buying less portfolios, cash flow is positive and leverage is falling. Conversely, leverage will rise when these companies start buying up the new portfolios - almost irrespective of how attractive pricing will be on those (and they all have cash and need to buy).
Yesterday morning:
Intrum: Nordic Capital - Intrum’s largest shareholder - have taken profit on Intrum after selling almost 20% of their holding in an accelerated bookbuild this morning. The Swedish PE firm remains the largest holder after the transaction with a nearly 40% stake. The sale comes at a time when Intrum’s share price exceeded pre-pandemic levels while portfolio purchases are down, driving down the faux Cash EBITDA Leverage calculation on which the market is hooked. We may see more sales over the next year, so as to avoid excessive exposure when leverage rises.
Well done.
Wolfgang
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E: wfelix@sarria.co.uk
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