Intrum buys a €1bn portfolio from Cerberus and removes it from secondary market

Intrum has completed one of the largest deals since the pandemic began, acquiring a portfolio of 100,000 unsecured loans worth 1.000 million euros from Cerberus and shaking up the secondary market.

The portfolio consists of 100,000 unsecured loans, mainly consumer loans, although there is also a part of corporate finance. These loans are part of some of the portfolios previously acquired from banks by Cerberus and managed by Gescobro.

Named Project Segura, the operation has been advised by Alantra and involves a significant movement in the secondary market. That is to say, instead of buying directly from the bank or institution where the defaults have occurred, it has been carried out between collection managers. 

Even before covid, the debt collection industry expected an upturn in secondary market transactions, something that did not happen due to the paralysis of the sector as a result of the pandemic. The operation, according to market sources, shows that movements in the sector are being reactivated. Unsecured loan portfolios are usually sold at discounts of more than 80%, although in the secondary market the discount is greater.

In fact, several operations are already underway. Banco Santander has put up for sale a portfolio of 600 million euros in non-performing loans (NPL) to SMEs, a project called Titán, which is being advised by Alantra, as reported by El Confidencial. The Cantabrian bank has already sold two portfolios of NPL at the beginning of the summer, for a nominal value of 800 million euros.

Waiting for more defaults

Expectations of defaults due to the effects of the crisis anticipate a boom in impaired credit portfolios, especially in consumer and corporate lending. However, the economy is still supported by cheap financing, both by the stimuli of the European Central Bank (ECB) and by public guarantees through the Official Credit Institute (ICO), and also by temporary lay-offs (ERTE). The moratoriums have also prevented an initial wave of defaults, although banks such as BBVA and Sabadell have already recorded increases in refinancing, which are usually the prelude to defaults. 

As a result, default forecasts have improved in the financial sector, and it is unclear when the expected upturn in defaults will arrive and on what scale. 

As shown by the purchase of Intrum, more movement is expected in the secondary market. In other words, entities will sell large portfolios of unrecovered loans through their servicers, given the different appetite and strategies in the recovery management sector. With this acquisition from Cerberus, Intrum approaches 53.000 million euro under management in Spain, where 2,000 of its 10,000 global employees are based. 

Original Story: El Confidencial | Óscar Giménez
Photo: Intrum website
Edition & Translation: Prime Yield