(Bloomberg) -- Swedish debt collector Intrum AB won bondholder support to start restructuring a 58.4 billion-krona ($5.7 billion) debt pile as it seeks to put its finances on a more sustainable footing.
More than 66.7% of bondholders signed up to a lock-up agreement, passing a threshold allowing for the deal to be implemented, according to a statement on Friday. The accord means creditors are now bound to the eventual restructuring process, whatever form it may take. Intrum “strongly encourages its remaining noteholders” to support the move, it said.
The deal with bondholders will likely help Intrum stabilize its unsustainable debt structure and manage looming repayments. The company’s troubles stemmed from the financing of non-performing loans with high-yield bonds when interest rates were near zero. But the increased cost of financing hobbled its business model, forcing it into a restructuring with creditors.
Europe’s debt collection sector more broadly continues to struggle in the face of increased competition and rising funding costs. Like Intrum, the problems have been more severe for companies needing to refinance billions of euros of bonds. iQera Group SAS is in a conciliation procedure in France to restructure its debt, while Lowell Group Ltd. is preparing for talks with creditors to address notes due next year.
The deal put forward by Intrum envisaged the repayment of its 2024 bonds in full, alongside the extension of 90% of the nominal value of its remaining bonds by three years. As compensation, bondholders will receive incentive fees and 10% equity in the company. The firm will also sell €526 million ($583 million) of new senior secured bonds, with some of the proceeds used to buy back the exchanged debt.
Earlier this month, Intrum said that a majority of its lending banks had also agreed to the restructuring proposal, as well as extending the maturity of a €1.1 billion revolving credit facility to 2028.
The legal route to achieve the restructuring remains undecided, with Intrum saying it will agree on “the process most appropriate to secure the successful implementation.” While a consensual transaction would require the support of 90% of bondholders, the deal could be implemented also through a court process that requires lower thresholds, such as a UK scheme of arrangement, which needs 75%, or a US Chapter 11 or Swedish process, which only require 66%.
Intrum’s shares, which gained as much as 13.7% when trading started in the Swedish capital on Friday, were up nearly 7% by 12:40 p.m. local time.
Not everyone welcomed this plan, however. The deal has faced some push-back from a group of creditors holding the majority of its bonds due in 2025. Its members have signed a cooperation agreement aimed at improving their terms in the restructuring and have asked in a letter to see confidential communications between the company and the funds that agreed to the restructuring deal. If Intrum chooses to implement the recapitalization via a court process requiring a lower threshold for support, it might not require the consent of the disgruntled bondholder group.
The notes maturing in August 2025 dropped by one cent on the euro to 75.9 euro cents, according to data compiled by Bloomberg.
--With assistance from Irene García Pérez, Giulia Morpurgo and Luca Casiraghi.
(Updates with bond and share prices. A previous version of this story corrected the company’s debt figure in the first paragraph.)
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