(Bloomberg) -- Swedish debt collector Intrum AB expects to file for Chapter 11 bankruptcy protection in the US next month as it seeks to restructure a debt pile totaling 58.4 billion kronor ($5.5 billion).
On Friday, the company began soliciting votes from its creditors for a prepackaged Chapter 11 in the Southern District of Texas and it expects to kick off the process in mid-November, according to a statement. In a so-called prepack, the terms of the deal are fully negotiated with creditors before filing. Intrum’s proposal aims to cut a slice of the debt in exchange for an equity stake.
The debt collector’s troubles stemmed from the financing of non-performing loans with high-yield bonds at a time when interest rates were near zero. But a sharp jump in the cost of financing over the last two years hobbled its business model, forcing it to negotiate a restructuring.
The company chose to file for bankruptcy protection in the US after failing to clinch a deal with some of its bondholders and reach the 75% majority needed to complete the restructuring in the UK with a scheme of arrangement.
While Chapter 11 is a more expensive process, it requires the backing of just two thirds of each class of creditors. The company has support of 73% of bondholders and 97% of its bank lenders by value, according to the statement.
Seeking Consent
Getting support from investors before the actual bankruptcy filing is essential to minimize uncertainty and speed up the process, which the company aims to complete by the end of the year.
Intrum is seeking to get consent for Chapter 11 from holders of Swedish-law bonds by Nov. 13, according to the statement. Creditors that have already signed up to the restructuring are also bound to reconfirm their support by voting in favor of the plan, it said.
The restructuring deal, which the company struck with a group of its bondholders in July, envisages the repayment of the 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 ($570 million) of new senior secured bonds, with some of the proceeds used to buy back the exchanged debt.
The company’s plan had faced opposition from two groups of creditors. Talks are ongoing with a group of bondholders holding notes maturing in 2025, represented by Lazard and Weil Gotshal, which signed a cooperation agreement to try to achieve better terms from the restructuring. A separate group of bondholders holding notes in Swedish krona — who are working with law firm Ropes & Gray — has also requested an improvement on the proposal put forward by Intrum.
Intrum said it continues to operate as normal “with no disruption of service.” Its bonds due August 2025 dropped 1.7 cents on the euro on Friday and are indicated at about 77.4 cents, according to data compiled by Bloomberg.
--With assistance from Janine Phakdeetham, Christopher Jungstedt and Luca Casiraghi.
(Updates with bond price in last paragraph.)
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