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Coin Flipping: IJSS update

16 April 2020 by jbchevrel

Despite we are still weeks away from Q1 earnings in Europe, ratings agencies are already downgrading names in our universe at a rapid pace. Downgrades in 2020 so far are 2x the number of upgrades for € IG corp names and 16x for HY. The #downgrade/#upgrade ratio for HY had previously failed to come below 1x since GFC, even in the years which were most supportive for credit. Yesterday after our European close, Intrum AB (IJSS) is joining the list of downgrades. Formerly Intrum Justitia AB, IJSS is a Sweden-based credit management services company. They offer services covering the entire credit management chain, ranging from prospecting and segmenting to payment management services, collection and financial services. Its offering includes credit optimization services, such as credit decisions, credit monitoring and credit information, as well as consultancy and advisory services. Its offering also includes payment services, such as sales ledger services, reminder services and e-commerce services, as well as VAT refund services, and collection services, such as debt collection and debt surveillance services, as well as worldwide debt collection services. IJSS has subsidiaries in Denmark, Italy, Lithuania, Portugal, Switzerland and the UK. Intrum's long-term rating was downgraded by S&P to BBn from BB+n. Their outlook remains negative, leaving the door open for further moves in that direction. The market cap has been basically halved on the back of the covid outbreak. In the aftermath of the downgrade, the IJSS 5y CDS is only slightly wider, at 17% upfront +5% running. The curve doesn’t look impacted much on our end. We mark 1s5s around 10% and 3s5s around 5%. Short cash (22) is about 92% and longer cash is within 82-85% (24, 26, 27). This CDS was tighter than 300bp before the COVID outbreak contaminated our market.