Intrum AB (publ) (INTRUM) Earnings Call Transcript & Summary

Welcome to Intrum conference call. [Operator Instructions] Now I will hand the conference over to CEO, Andres Rubio. Please go ahead.

Excellent. Thank you, operator, and good morning, everyone from [ gray skied, the not so-called ] Stockholm. I'm Andres Rubio. I'm here with Emil Folkesson and Anders Blomqvist. Today's session will focus on last night's announcement. We will not be commenting on the fourth quarter results. Those -- that announcement will be coming on Thursday. We have a brief presentation, which will take probably about 10 plus or minus minutes and then we will open up to questions. I'm sure many people have questions. So before we get into the detail of the presentation, I just wanted to set the table for what we did last night and why we did it. This has three distinct dimensions One is a financial transaction, which simply raises sales assets to raise liquidity to derisk the company. The second is that it's a very important endorsement of our book values, of our collections curve and our servicing capability by a very sophisticated counterparty. And the third is it's an acceleration of our strategy that we started down since the middle of last year and explained in significant detail last year at the Capital Markets Day. So if we jump into the presentation on Page 3, there's an overview of what we did. Top left, the assets that we have transacted on are large, broad across our portfolio. So they include 13 of our 20 countries. They include over 10,000 portfolios. It is a nominal value of SEK 382 billion. And it had a book value as of last September, which is the transaction value date for purposes of this deal of SEK 11.5 billion. The price is one which I previously flagged to the market as approaching book value, and it is 98% of book value as of that September 30th date. We are retaining all of the servicing. if you look at the bottom left, with a minimum 5-year servicing agreement for the full perimeter. Our servicing fees remain largely unchanged. And Cerberus, who was already a top 5 client, has now cemented -- significantly increased their business with us and cemented their position as one of our top clients. And as a result of this transaction, we're going to use the entire proceeds of SEK 8.2 billion, which will be paid on closing during the first half of '24 to reduce our leverage. That will reduce our leverage. Looking back at the last published figure as of Q3 of SEK 58.9 billion, down to a little bit under SEK 51 billion. It does actually slightly increase our leverage ratio with an LTM pro forma cash EBITDA of SEK 11 billion and that SEK 50.7 billion of pro forma debt. If we move over to Page 4, you see the transaction structure. One of the important elements is that we are not only just selling assets and foregoing profits on the assets, but we are retaining an asset -- retaining an interest of those assets in the form of a leveraged partnership with Cerberus. And as you can see here, we are a 35% holder. Cerberus is a 65% holder. The portfolio and the assets are being leveraged completely nonrecourse. And as a result of all this, we are not only raising liquidity and derisking the company, but we're also entering into a very important investment partnership with Cerberus, who, again, is one of the most sophisticated, if not the most sophisticated investor on a global basis in the NPL space. So it's consistent with our near-term and long-term strategy to partner with third-party capital to increase our activities, particularly on the investing side, without increasing our balance sheet. Moving to Page 5. We have the progression of figures from the book value last September of a little bit over EUR 1 billion on the left-hand page -- on the left-hand side of Page 5. We have a 2% discount. From the moment -- from September 30th to closing date, we keep all of the Intrum collections. And then we have total consideration at closing. When you build up to what we are receiving, we received the SEK 8.2 billion, which includes 100% of the proceeds from the leverage against the assets, plus Cerberus' cash purchase price for their 65%. When you add that, and that's what we're receiving at closing. When you add to that Intrum cash collections and the value of our stake, you get back up to approximately the gross purchase price. One important element of this is that there will be two things. We have reached our -- one of our targets, espoused or articulated or promulgated at the Capital Markets Day, which is to reduce our investment book from a little bit under SEK 40 billion to SEK 30 billion. With this transaction, we're down to approximately SEK 26 billion. There will be an accounting noncash adjustment when we close to retroactively reverse both investment and servicing profit between the 30th September date and the closing date. That's just the necessary artifact of this transaction and is just meant to reflect the fact that back to September, we don't own 100% of those cash flows or that servicing profit. If we move to Page 6, we look at the various benefits. And what we've done here, as I said earlier, is a financial transaction which has a trade-off. We're trading off future profit on assets to our current liquidity. We raised significant liquidity, the SEK 8.2 billion. We lowered our aggregate leverage. And with this, we have absolutely bullet-proofed, if you will, our ability to meet all our obligations during '24 and '25. So we have substantially reduced any kind of financial risk over the next 2 years, where we could actually meet those maturities of approximately SEK 20 billion without relying on market access. That does not mean, and I've gotten questions already this morning, are we going to not be a bond issuer or a debt issuer anymore? That just means that we have the flexibility of being in the market if it makes sense, but we don't have to be over the next 2 years to meet what our significant maturities. So it raises significant liquidity and accelerates our deleveraging. It is an important validation of our estimated remaining collection curves on a representative and large sample of our investment portfolio. It accelerates our strategy, the third point. We have taken SEK 11.5 billion of assets today, which sits in our investment portfolio, which are 100% funded by our debt and move them over into a third-party servicing bucket. They're now controlled by a third party, one of our largest clients, Cerberus. And we -- that is part of the acceleration of our strategy to go to capital light but also, more importantly, to grow our third-party servicing business. So it is an acceleration of a strategy that we hold over now and the long term. It cements our relationship on the servicing basis with Cerberus who, as I said earlier, is one of the top, if not the top NPL investor on a global basis. It provides the foundation for future partnership. Now we can look at the future and say, okay, we want to increase our investment activities and volumes without increasing our balance sheet. This, initially, with these assets forms the basis of what is going to be a logical front book partnership come in the future, as I've spoken to the market in the past and that we are in discussions currently, and we'll probably announce something in the coming months during 2024. And again, long term, this is an important step in focusing and becoming a servicing company, but more importantly, becoming an asset management business model on our investing side. So what that means is that long term, we will grow our investing business significantly, but using third-party capital, not our proprietary balance sheet. On Page 7, this is completely consistent with what we communicated at the Capital Markets Day and is consistent with our strategy to reduce leverage and derisk our platform. As you know, last year, we lowered our volume -- annual volume of investments in the second half of the year from what was SEK 6 billion, SEK 7 billion, SEK 8 billion down to SEK 2 billion on an annual basis. That has been done, and that continues. You'll see more on that on Thursday. We have exited five markets. We're evaluating the exit of three additional markets, more on that in a second. And now we've tactically sold our back book. And we are in the process of reducing our costs and becoming more efficient. We have a tactical specific campaign we announced last year, which I'll give more news on Thursday on our progress. But we continually look to regain or improve our efficiency and regain our operating both efficacy and efficiency. And all of that reduces leverage and derisk the platform. The cash proceeds, very importantly, from this deal of SEK 8 billion exceed what we assumed and communicated in the Capital Markets Day of SEK 6 billion. That -- and also at the Capital Markets Day, it was important, we assumed we lost the servicing on those assets, which here, we're retaining the servicing. So on both of those elements, this is more positive from a liquidity standpoint and a servicing standpoint. The additional benefit is that as we look at the potential market exits that are still on the table today in Hungary, Slovakia and Czech Republic, we can now look at those because we've raised sufficient liquidity in this transaction. We can look at those more with an eye towards not meeting the liquidity but focusing on are we getting the right value as those markets have very specific factors in our high risk, high return markets relative to what we did today, which is a broader set of assets across many different jurisdictions and many different originators and also a more seasoned set of assets. So complete consistency with our near-term targets. On Page 8, you see how important this is from our client franchise as well as our investing -- the investing landscape in NPLs in Europe. As you can see on the top left, this combines 2 of the top 5 investors since 2015 in NPLs. It combines the biggest financial player with the biggest strategic player. And Cerberus again, increases what is already a very significant amount of business they have with us, increases it significantly and we in the form of being a servicing client. The bottom half you've already seen is a quote from David Teitelbaum, who is the Head of Europe of Cerberus, where this is consistent with their strategy to focus on this asset class to find good investment opportunities and to partner with market leaders. Finally, on Page 9, long term, and it's important to see where we've come from and where we're going. And this, I think, graphically depicts that. Before last year, we were effectively -- we grew our investment business. We had to grow our balance sheet. We were 100% balance sheet funded proprietary investor. Those days are in the past, as we've already told you. We want to actually be more capital light. We want to be more servicing focused and bring in more third-party capital. '23 was a transition year. We reduced our investment. We selected exit markets. '23 through '26, inclusive of this transaction involves this back book sale and also looking at investment partnerships where we will increase our investment activity from the SEK 2 billion now to maybe SEK 8 billion to SEK 10 billion, but keep the SEK 2 billion in terms of our own funding of those increased investments and the rest bringing in third-party capital. And then ultimately, in the next 3 years and beyond, we hope to transition this to a broad-based asset management business model on the investing side on our core focus on consumer nonperforming loans. So again, before we switch to Q&A, which is the next page, the -- there are three elements of this transaction, which are quite important. They're the pure financial element, which is we are selling SEK 11.5 billion of assets plus the profit, and we're foregoing the future profit, but for our retained interest in exchange for SEK 8-plus billion in liquidity. And what that allows us is to meet all our near-term maturities with certainty and substantially derisk the company over the coming 2-plus years. It is a -- second point is it's an absolute endorsement of our asset values and our curves with a 98% purchase price and also of our servicing capability with Cerberus becoming one of our biggest clients. It was already a large client. They are a very sophisticated counterparty. So -- and they're looking for assets in this space. So for them to do a transaction on these terms and trust us with the servicing is a significant endorsement from a very qualified and sophisticated counterparty of our investment, values as well as our servicing capability. And then finally, it leapfrogs or accelerates our strategy. We took SEK 11.5 billion of assets, which were in one bucket, which is 100% funded and owned by us to a third-party servicing bucket, accelerating, extracting cash and accelerating the development and the size and the growth of our servicing business. And also by keeping 35%, we created an investment partnership with Cerberus, which we will continue to replicate going forward to grow our investing business in that form as a step towards a broad-based asset management model down the road. So with that, I think we can open it up for questions. I know there are probably over 200 people on the line, so I'm sure there are a lot of questions.

[Operator Instructions] The next question comes from Jacob Hesslevik from SEB.

So my first question is, can you mention anything about the geography of these portfolios? Is it Northern, Central or Southern Europe?

And it wouldn't be a call like this without you being the first question. It is a broad-based -- there are countries that are heavier and lighter. It -- again, it's broad-based. I don't have the list of countries ahead of me, but it's 13 out of 20. And so it's very broad-based.

All right. There is some concern, I think, from the market that you're selling your best assets, your latest portfolios with the highest IR, et cetera. How can you comment on this?

I mean what I would say is that these assets are assets that sat in several entities of ours that are very seasoned. They're not recently originated assets. They're quite seasoned assets that were originated well before 2017 and '18. And as a consequence, you can tell that there's only -- the purchase price that's being paid of roughly EUR 1 billion against EUR 30 billion, plus or minus, is a little bit under 3%. Those are assets you pay for long-term seasoned assets. They're not our best assets. They're not our most recent assets. They're not our highest IRR assets.

All right. That's very clear. And considering you have now done the setup on your back book, and you also mentioned before that we should expect a similar partnership with capital partners on the front book as well, but is your guidance of deploying around SEK 2 billion per year still intact from Intrum side? And second, how large should you -- how large share do you want Intrum to represent in the front book purchases?

Yes. I mean exactly, Jacob, you interpreted it correctly. This is the beginning of a step towards a front book partnership and then ultimately an asset management model. I've always said publicly that I'd like us to not invest just SEK 2 billion or SEK 3 billion, but to invest SEK 10 billion, but to remain our funded portion be SEK 2 billion plus or minus. So for now, the SEK 2 billion remains and more to come. And the front book, we are in discussions with not only obviously Cerberus who would be an obvious candidate but others and more to come on that during '24.

All right. Very clear. And one last question then. You mentioned that cash EBITDA will decrease by 20%, but you also reduced your debt. So your interest costs should decline as well, I guess. So what would the net effect be if we look on cash earnings?

So I'm looking at Emil here, but we have -- SEK 11 billion is the pro forma figure for cash EBITDA that's in the figures. And there is a savings of interest, assuming just the RCF gets repaid of...

SEK 570 million.

SEK 570 million on an annual basis. So -- and we can -- there was a question earlier today from an investor who called me who asked about how do we figure this out at the EBIT and below level? I don't want to get into that level of detail on this call. But what I would like to do is, particularly for you, Jacob, and other research analysts to invite you to please speak to Emil, and we can work through that so you can be clear and then you can communicate with the market on that clarity.

The next question comes from Patrik Brattelius from ABG.

Can you hear me?

Yes.

Perfect. Yes, a follow-up there on Jacob's question regarding which portfolio you have sold given that we can see that you have sold the back book. Can you give some impact on this asset sale on the ERC, please, so we can compare?

I mean it's similar to cash EBITDA. And I now, by the way, have in front of me, the perimeter of countries, I can actually communicate some of them. It includes Spain, Germany, Greece, Sweden, Finland, Denmark, Poland, Portugal, France, Switzerland. So it's a very broad set. Those are assets that, as I said earlier, are quite seasoned, that were sitting in specific entities and formed the perimeter of the transaction. So it is roughly a similar type reduction in ERC as our EBITDA decline of 20%.

Okay. That is fair. And given that you expect the leverage ratio to be pushed out 1 year in terms of reaching your target, is there any scenario where the dividend will still be reinstated 1 year before that? Or do you need to reach the 3.5 level before a dividend is reinstated?

It's a very, very good question, Patrik and as in all transactions, there are trade-offs. The trade-off of future profit for current liquidity. One of the implications of this is that it makes that -- hitting that 3.5 by year-end, '25, slightly more difficult than slipping to '26. But this is a dynamic equation. We are going to make every effort in '24 and '25 to regain profitability to further lower our debt to regain that steepness in the deleveraging curve. And I won't comment because dividends are not my decision. They're decision at the Board and at the shareholder level. But our intention is to get to that level as soon as possible and our intention is to resume or restore our dividend as soon as possible.

Okay. I understand. And then on some of the transaction details, can you please share some more details of the structure in the JV? For example, how it's financed? Is there any covenants to be aware of? The conditions for cash flow to be upstreamed, et cetera?

I mean, again, as we put out the structure on the presentation, we are a 35% holder. Cerberus is a 65% holder. I believe the leverage against the purchase price is in the 50s. You can tell that from the numbers, frankly. There are -- it is completely asset-backed, not recourse to either Cerberus or ourselves. And so it's a function of their -- of the asset profile and the asset cash flow. That's all I can comment at this point.

And also to be perfectly clear, the cash flow out of the vehicle to the shareholders are ranked equally. So they are distributed on pro forma basis, 65%, 35%.

Yes, that's actually an important point because we've -- obviously, these type of investment partnerships, there's been a mixed history, you have to recognize at Intrum. Our interest of 35% and Cerberus' interest of 65% are completely pari-passu. They don't have any kind of a preferred position, and we do not have a preferred position. We are equal proportionate partners in the equity of the vehicle.

The next question comes from Lars Christian Dueser from Deutsche Bank.

So first of all, on the JV structure and JV debt, can you at least say how the cash flows will look like in the next, let's say, 3 to 5 years? Because if we go by other SPVs, usually in the first 3 or 4 years, there's debt pay down, meaning that the equity and your 35% share won't receive much, if any.

Yes. I mean, listen, I'm not going to get into that level of detail. What I will tell you is that you're not directionally incorrect. Over the first 3 to 4 years, the vast majority of the cash flow goes to repay the debt, but there is equity leakage, obviously subject to certain conditions and performance, but there is equity leakage to Cerberus and to ourselves on a proportionate basis.

Got it. Got it. And there won't be any, call it, a guaranteed return obligation or put rights like with CarVal in...

None of that. That was what -- that's what I was alluding to in the last answer, which is there's absolutely no such things as put rights or preferred position or guaranteed return, none of that. Cerberus and ourselves are proportionate but absolutely same level and same rights equity partners.

Got it. Moving on then. If I look at the SEK 0.2 billion impairment due to selling at the discount and the SEK 0.6 billion reversal of profits, it looks like the underlying unlevered book value realization came in at 93%. So the question, obviously, is how do you feel about the remaining back book here in terms of asset quality? Also because it looks like what you indicated earlier on the call that you sold older vintages into that JV, which were probably locked in at a time when the market was still healthier, right? I mean in 2020, '21 returns were actually quite depressed.

Well, let's -- okay. In terms of this transaction, let's be clear, what is most important is that Cerberus, a very sophisticated counterparty on a very granular portfolio, believed in and is counting on at least our investment curves. So I feel very comfortable this validates our overall process of a continual evaluation of our investment curves. As it relates to book value, even though there's a different risk environment now, and I think everyone on this call knows, we don't do mark-to-market accounting on our assets. We only change the value of our assets if there's a significant change in the expected cash flow, not if there's a change in the investment environment or the required return, and we consistently outperform our underwriting. So I think this is a validation of our asset values as well as our investment curves, and I feel very comfortable with this. And I will correct one thing. This is -- these are older assets. I think I understood your point correctly. These are older assets. We're talking about 2017 and before. So they're quite seasoned. I just want to make sure I make that point because I'm not sure that was a premise to your question.

Got it. Got it. And then the last question, really. So you raised now SEK 8.2 billion net. It's, call it a 1/3 above the SEK 6 billion original target. Why did you go for such a much more material quantum being raised considering that the deal is releveraging? And if I look, for example, at one metric I follow, the pro forma consolidated net debt compared to book value, that is now going up to close to 200%. Is it because you just want to be more prudent here and don't want to bank on any sort of market access? Does it tell us anything about the organic servicing growth prospects? It would be great to get your view on this.

Absolutely. And it's a very, very good question. My view is that given the current environment, and obviously, today's environment is even different than September. But given the current environment, I wanted to be more prudent and there was a desire on Cerberus to do a more meaningful transaction. And so we raised more liquidity. So I just wanted to raise on margins slightly more liquidity to make sure that we are absolutely, as I said earlier, bulletproofed our ability to meet the next 2 years' maturities, given the environment. And then on your ratio, which is a very valid ratio, net debt to book value. But I would also look at net debt to ERC, which is quite, quite healthy, actually. Given our ERCs are so reliable as they have been historically, and given that this is a validation of our ERCs, I would focus more on that ratio than net debt to book value per se. But obviously, you look at what you would like, please.

The next question comes from Rickard Hellman from Nordea.

In terms of leverage, you mentioned that this deal actually was seen as strongly in that sense that you did receive the servicing agreement. It was also larger than your [ communications ] earlier. But anyway, the leverage target will be pushed 1 year. Why is that if you also received the stronger servicing? And also following up on that, you talked a little bit about ways of accelerate deleveraging. Do you have any color on what might that be?

So the leverage ratio gets pushed into the next year, not by 1 year, just to clarify. There's a lot of moving pieces here. First and foremost, we did a larger transaction. When you do a larger transaction, the trade-off of future investment profits versus current liquidity becomes a bigger point. And so therefore, that -- what that did was our deleveraging ratio, which previously got to 3.5 by the end of '25 has just flattened a bit. So it's gone into '26. And so that's just a consequence of doing a slightly bigger deal. The trade-off is slightly bigger, so it just makes deleveraging slightly harder over time. That's just math effectively. And there's a lot of moving pieces, I appreciate, and we can certainly explain it offline if you would like more clarity on that. But we are accelerating. In terms of accelerating, recapturing some of that steepness to the curve, what we're looking at is continuing to execute on the previously announced cost-cutting program, looking at other ways to become more efficient, having our technology investments that we made last year start bearing fruit and making us more efficient at the primary level, at the collections level, all of that are things that were not necessarily in our CMD numbers, which are things that we are pursuing, which will improve our profit and improve and steepen that leverage ratio decline. So this is part of our overall -- I'm not going to get into any specific initiatives, but this is part of our overall focus on increasing profit, becoming more operationally effective and more efficient and fully executing on the cost program. And then on top of it, over the next 2 years, if we do some of these front book partnerships that we've mentioned, that's purely on top of anything we've assumed here, and would be adding not only -- it would be adding meaningful servicing business, which would create profit that would also steepen that lowering of the leverage ratio.

Okay. I see. So yes, I fully understand that. Of course, there's no magic bullet, of course, so you have to continue to work very hard, and it seems like it's more of doing the same then. In terms of accounting, how will this be accounted? And what will be recognized at 3PC in your communication going forward?

Third-party collections, Yes. So I mean, again, the accounting for this transaction will occur at closing, will occur in '24 and will effectively go back and recognize and retroactively correct for the fact that we have -- we didn't own 100% of this investment, booked investment. It come back to September. That's a necessary artifact of the transaction. And then what -- I didn't follow the second half of your question in terms of collections. In terms of how this is going to be reflected going forward, this will be an equity method joint venture going forward. We will have 35% in a levered partnership with Cerberus. We will do it an equity method. If we receive cash over the near term as the prior caller asked, there's going to be leakage. If follow our business plan, which we fully expect to, we would reflect that on our equity method going forward.

Okay. And the third-party collection will then be the 65% that is not your share?

No, no, the third-party collection -- sorry, let's separate. Everything I just described was really about the investment partnership, which is 65-35 and the equity method is the 60-35 joint venture. We retain servicing on 100% of the assets.

For sure. Yes. Okay. Yes, for sure. Okay.

The next question comes from Ermin Keric from Carnegie.

So maybe I'll actually try to follow up on Rickard's question. So the whole JV will be accounted as 3PC. All the collections done for the JV will be in the 3PC line on the servicing as well, right?

Correct.

Perfect. And can you say anything more about the servicing terms? You had the target of being a 25% servicing margin. Is this in line with that? Or how should we think about that?

Again, these are assets that were currently being serviced internally. As we said in the presentation, and I think in the press release, I'm not sure, the terms have largely remained the same. They are not at 25%, they are below, but they are very meaningful to us and they're important business for us. It was important to retain this because as you recall, in the CMD, we assumed we didn't retain this.

Got it. And maybe just following up on the previous question on the kind of different metrics to look at leverage and you mentioned net debt to ERC, as was said, doesn't include collection costs. But if we just think about it, if you divested at book value and you're saying that you're going to use 60% leverage in this SPV, if we use 60% leverage on the rest of your book, you get a quite punchy leverage on the servicing unit that's remaining? Or how should we view that? I mean -- I'm sorry, am I thinking about it the wrong way?

Sorry, can you repeat the question, Ermin. I apologize.

Of course. No. So what I was saying is that you're now using 60% leverage in the SPV, right? If we would assume you use 60%, 70% leverage on the rest of the book, so we allocate the rest of your net debt to the servicing units, you would have quite a high leverage ratio for the servicing unit in relation to EBIT, EBITDA however you want to put it.

I understand what you're saying. I don't think you can compare an isolated SPV with no recourse to any ongoing recurring entity with ourselves. We obviously have a model that historically we leverage much more highly our assets. We're not -- we're moving away from that. So I mean, again, I can't tell you what to look at. But I don't -- I never felt that we had levers that we couldn't fully service and maintain, but I recognize that we need to delever, which is one of the reasons we did this deal. But ultimately, I don't think you compare the SPV terms with debt and assets within a corporate form like such as Intrum.

The next question comes from Gustav Larsson from Artic Securities.

I have two questions. Now that you're doing a larger transaction and starting this partnership with Cerberus, does this imply any further potential for cost savings in either the investment savings -- investing segment or services segment compared to your previous targets?

We are continually looking to improve our margin. We have a very aggressive and -- but achievable margin target for servicing. That implies not only doing things better at the primary level, but doing things better throughout the entity. We are going to continue to affect the cost program announced last year, but we're going to, on top of that, to continually become more efficient. And then also as I said earlier, the technology investments we've made bear fruit, which should bear fruit in improving our collections and reducing our cost to collect. So there's always room to improve, and we will continue to pursue that, Gustav.

The next question is regarding use of proceeds here. Now you say that you have liquidity to cover all capital markets debt throughout 2025. But in the press release, you commented that interest costs will be down SEK 570 million if proceeds are employed 100% towards repaying the RCF. Can you comment on the share here? Is it fair to assume that you will repay RCF and capital markets debt through [indiscernible]? Or will you use all of it to repay the RCF first?

So a few things there. To be clear, between the liquidity we raised in this transaction and our organic cash flow, we will have the cash to fully meet all our obligations in '24 and '25 without relying on refinancing our market access. So it's not just the liquidity we've raised, so it could be raised plus organic cash flow. Second, that does not mean that we won't access the market. That just means that we don't need to access the market. And then on the SEK 570 million, that's indicative to you. It's a mathematical equation that if we take all of the proceeds and reduce our RCF, the interest savings is SEK 570 million. It's a metric to give you a sense for how much interest savings we are. It's not necessarily what we're going to do. Our RCF matures in '26. We're already in discussions with our banks, and we will come back to the market as that evolves.

Okay. Can you comment anything? I mean, you most likely have an asset sale covenant -- another covenant on the RCF. So will you use any of the proceeds to repay the RCF first?

As you know, essentially three ways we did to cash proceeds from a transaction like this. It's reinvestment in the business, it's repay bonds pro rata at par, and it's to repay and cancel RCF. And it's, to be fair, to repay bonds at par at the current trading level is not -- probably not the most smart thing to do. So repay the RCF and cash portion of it is probably the likely outcome from proceeds from this transaction.

The next question comes from Nicolas Gourdain from Lexcor.

Andres, another question on the RCF, please. So you have SEK 20 billion of RCF, but I remember there's a covenant that says you can only draw, I think 30%, 35% of ERC or something. So is the math correct that the availability is now around SEK 13 billion down from SEK 20 billion? Just wondered if you confirm this, please.

Yes. I mean I think you're correct that it's related to ERC, but Emil can answer that in more detail.

Yes, you're correct. It's 35% of 84 months ERC. So technically, when we're selling ERC, our capacity to draw the RCF is reduced. And that also speaks into the answer to Gustav's questions before. But given that we don't have overcapacity in the RCF, there's no need to pay that commitment fee and then that's an obvious pocket to use as usual proceeds.

So another one on the RCF, there were some articles on Bloomberg suggesting that some banks were possibly a floating some -- they're part of it. I was wondering, has there been any change in the lender pool and then the characteristics of who is behind the RCF at this point compared to a few months ago?

I mean, again, I can't comment on what other people do with their exposures. This is an instrument that is very clear. You understand that in the marketplace, if someone chooses for their own risk purposes to either increase or decrease their exposure to it, that is their decision.

And also to be clear, we haven't been notified about any changes. So we haven't seen any changes in the lender pool as of today.

Okay. And then if I may, a final one on the servicing of this portfolio that you have said -- I mean that you are selling to Cerberus. So I understand this portfolio was effectively internally serviced. And then presumably, there was some sort of internal transfer pricing. And when you say the terms are unchanged, is it correct to just assume that, that internal terms of pricing remains the same effectivity although this going from internal to external can affect?

Obviously, to affect that internal to external, we needed to do a service agreement, which has some different elements. But largely speaking, it's the same.

Right. And therefore, does that mean that if we think of the profitability of the EBIT, let's say, of the servicing business, it's for all intent and purpose is going to remain and change for specific...

Again, relative to our CMD plan where we thought we would lose the servicing, this is better. But relative to our current level, it's a continuation. It's -- we're not losing it. Obviously, if we do any front book partnership, that's purely additive, as I said earlier.

Okay. Very clear. So right now, no change in the EBIT of the servicing at this point.

The next question comes from Haris Papadopoulos from Bank of America.

I might have missed it, but did you say something about your dividend and not being reinstated before you reach your leverage target now that it has been delayed to '26? Could you give us an [ info ] on the dividends?

No. So again, I said it earlier, Haris. The leverage ratio is slipping from year-end '25 into '26. We are going to try to recapture some of that profitability that we lose in this in other ways to bring it back. Our stated policy is when we hit 3.5, we will reinstate our dividend. I can't speak as to what we'll do specifically on dividends than 2 years out because it's in the future and also that's -- the dividend is also decision at the Board and shareholder level. But it is our intention to reinstate the dividend as soon as possible.

Okay. And the dividend will become contingent on the 3.5 leverage target through the cycle? Is that like something fixed?

I mean I think we did that as an indication of when we would reinstate it. And going forward, we would have an ongoing dividend policy, which would react to the market as well as our own conditions. But it's just meant to talk about the reinstatement. It's not meant that it would be on and off. And our intention is to continue to delever beyond the 3.5 to be clear.

The next question comes from Mudassir Nazir from Barclays.

I wanted to ask about the 35% stake that you've got in the portfolio. You mentioned that you will be accounting for it as equity method through JV. Could you disclose what kind of book value on kind of the balance sheet would you be taking for the stake?

It will be corresponding to our equity portion, so the investment in the vehicle. And you have the waterfall graph on Slide 5 in the presentation. I also got [ an email ], so it might not be uploaded on our web page, but you will be able to download the presentation if you want now, just for everyone's benefit. Today, you will see in proportion, how much we will reflect on our benefit as investment in joint venture.

Sure. Could you -- I'll have a look at the presentation, but could you just like to give me an approximate number?

It's approximately SEK 1.4 billion.

Okay. The other question I wanted to ask about was you've mentioned that the margins on the servicing business are pretty much the same as what you were taking internally. Could you say what those margins are? I'm just trying to compare it with the 25% target.

They are below the 25%, but very healthy. And I'm not going to talk about specific margins on that business.

The next question comes from Aditya Bhagat from BlackRock.

Congratulations on the transaction. I just had a couple of follow-ups. One is can we speak a little more about how you think leverage trajectory will be? You may be at 4.6 today, but how do you expect that to be end of '24 and end of '25? And also, am I right that you're restating dividend policy of no dividend until leverage is below or at 3.5x? Or should we expect that to be a bit more dynamic?

Sure. No problem, Aditya, Nice to hear from you. I mean, again, I'm not going to get into intermediate positions. You can look back at the deleveraging that we showed in the CMD. That 3.5, which was reached at the end of '25 has slipped into '26. You can do the math. It's going to be pretty linear subject to kind of quarter-on-quarter fluctuations. But we don't have interim targets. We have absolute targets within 2 to 3 years, and that 3.5 is slipped into '26. We're going to try to regain it and bring it earlier, as I said earlier, several times. The dividend, yes, I mean, we haven't changed any -- our dividend policy. Our intention is to reinstate our dividend when we hit 3.5. That's 2 years out. It will be not my decision. It will be the decision of the Board and the shareholders. And ultimately, our intention is to reinstate that as soon as possible.

There are no more questions at this time. So I hand the conference back to the speakers for closing comments.

So thank you, everyone, for not only listening to the presentation, but some great questions. I think this is a very important milestone for the company. We have stated that we were intending to do something like this for quite a while, and now we've done such an important accomplishment of a milestone and a milestone that we've previously flagged to the market. It is not only a financial transaction, but an important strategic endorsement and an acceleration of our strategy. And we will continue to pursue this strategy and try to find all methods to accelerate our strategy and improve our return and improve our return to not only our bondholders, but our shareholders over time. So thank you for coming along on this journey. Thank you for following us. As I said earlier, if there's any follow-on more detailed questions, please reach out to us, and we can have those discussions in a more bilateral manner. But I hope you all have a wonderful day, and I think we'll all be talking again on Thursday as it relates to the fourth quarter. Thank you, and have a great day. .