Europe's biggest debt collector was forced to file for bankruptcy after years of struggling to make its business of buying and settling bad loans work. Intrum, a credit management company that helps people and businesses with debt, announced Friday it will file for voluntary Chapter 11 bankruptcy protection in the U.S. If approved, the Chapter 11 claim will grant the battle-tested firm the opportunity to continue operating under a company-proposed reorganization plan. The plan would outline how the debt collection agency plans to restructure its own debts by potentially reducing the amount owed, extending payment terms, or selling assets to pay creditors over time. But, creditors must vote to approve the plan before it becomes legitimate. Following the Friday announcement the company began soliciting votes from its creditors in the Southern District of Texas and it expects to start the Chapter 11 proceedings in mid-November, according to a statement.
'Intrum expects to emerge from the prepackaged Chapter 11 process and the Swedish company reorganization process with ample runway and liquidity to execute its business plan and positioned for long term growth and success,' the statement reads.
In the so-called 'prepack' the terms of the deal are fully negotiated with creditors before filing.
Intrum’s proposal allegedly aims to cut a slice of the debt in exchange for an equity stake.
The move by the international debt collection agency comes at a time when the debt collection industry in Europe faces challenges, with a significant decline in non-performing loans diminishing the volume of business available for these companies. To read more click here.