In essence, Intrum did fairly well in calendar year 2020. The terminology used may make the report difficult to understand. The reference to NPL stands for non-performing loans – that is, debt that banks and the like are likely to sell in future when mandatory debt moratoriums and bank forbearance exhaust their duration terms. When mentioning a pick-up in the sale of debt, Intrum uses the term “moratoria”, the Latin plural of “moratorium”, which means delay in Latin, but in English a debt moratorium means a debt-collection delay mandated by government. CCP uses the term “forbearance”, which in law means, the action of refraining from exercising a legal right, especially enforcing the payment of a debt. For our purposes, these references can be taken to mean the same thing.
Also, Intrum's business does not exactly match CCP, but in essence where Intrum refers to “portfolio”, we CCP shareholders could substitute “PDL”.
Both Intrum and CCP mention a slow-down in debt purchasing because of moratoria-cum-forbearance, and that the supply is expected to normalise in 2021. This is relevant to CCP, because it is sitting on so much cash and unused borrowing headroom. I suspect that CCP may well be in negotiation to acquire either PDLs from distressed competitors (think Collection House), or the business as an operation (think Baycorp), and if so, I suspect it would relate to the USA operation. I just hope that if that is the case, we do not see another institutional capital raising.
Intrum also has a debt factoring line of business that CCP does not have, as far as I know. So reference to SME (small and medium enterprises) clients relates to that business.
Intrum functions with a high leverage ratio of 1:4, which I assume is the debt/equity ratio. Other than CCP, I am unaware of any significant debt-buying business that is not highly leveraged.
I am unsure what Encore Capital has published in respect to Q4Y20, but a full Annual Report is scheduled for 24 February. I suspect the story is going to be similar to Intrum – that is, FY20 (Jan-Dec) was not a disaster, and FY21 looks promising, especially the supply of fresh PDls. So much for all the disaster that Covid-19 was supposed to wreak on the PDL sector.
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