Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
A group of bondholders in Intrum, Europe’s largest debt collector, is preparing to try to block a crucial restructuring of its own €5.4bn borrowings after facing the threat of a writedown on their holdings.
Sweden’s Intrum has become Europe’s largest buyer of bad loans using plenty of its own debt, much of it issued when interest rates were low. However, rising interest rates have proved challenging — as they have been for rivals across Europe — as its debts come due for repayment.
Intrum announced two weeks ago that it had reached an agreement with a majority of its bondholders to restructure its debts.
Under the restructuring deal, Intrum’s existing unsecured notes would be exchanged for four series of new bonds that would mature between 2027 and 2030, at 90 per cent of their original value. Bondholders were also offered 10 per cent of Intrum’s equity as an incentive.
More than half of the bondholders in the group have signed a binding agreement with the company. Shares in the debt collector climbed more than 50 per cent since the deal was announced in Stockholm on July 11.
But some funds with debts expiring next year were angered by the move as they had thought they would be repaid soon. Companies often treat debt maturing first more favourably.
People close to the group of aggrieved bondholders pointed out that debts expiring this year had been repaid, and called for their holdings to be treated similarly.
The group of 2025 bond holders in question have signed a “co-operation agreement” to oppose the terms of the deal. One person close to the group said the deal offered by Intrum “did not respect the temporal priority” of the shorter-dated bonds.
To implement the deal, Intrum would likely need to go through a corporate restructuring via a court process such as a UK scheme of arrangement or a US Chapter 11 process.
The debt holders agitating against the deal are confident that they have enough support to block the first form of restructuring — via a UK scheme of arrangement — which would require about three-quarters of the debt holders to agree.
A Chapter 11 bankruptcy process would be easier for the company to implement as it only requires about two-thirds of debt holders to agree to it.
The short-dated bondholders argue that this would not be a good solution for a solvent company but people close to Intrum dispute this, saying solvent companies regularly use the Chapter 11 process.
The people close to Intrum added that the company was confident that it could implement the deal, and has added more support since the company said earlier this month that 50.1 per cent of noteholders had signed the binding agreement. The company is seeking support from other bondholders, one person close to the company added.
Intrum wants to “significantly reduce leverage, extend maturities, and support long term sustainable growth,” according to a statement released when it announced the deal.
Houlihan Lokey is advising Intrum. Lazard is advising the group of bondholders opposed to the deal. All parties declined to comment.