B2 Impact Asa · OSL:B2I
B2 Impact Asa — B2Holding — Debt Investor Presentation (November 2021)
71 slides from B2 Impact Asa's debt investor presentation, Nov 23, 2021
Slide 1: Investor presentation: EUR 300m Senior Unsecured Bond Issue
Investor presentation EUR 300m Senior Unsecured Bond Issue 23 November 2021 Photo: Natalya Letunova / Unsplash
Slide 2: Important information and disclaimer (1/3)
Important information and disclaimer (1/3) This investor presentation, together with its enclosures and appendices (collectively, the other person in relation to the accuracy or completeness of any such information, and neither the "Presentation"), has been produced by B2Holding ASA (the "Company" o
Slide 3: Important information and disclaimer (2/3)
Important information and disclaimer (2/3) The merits or suitability of investing in any securities previously issued or issued in the future by The Bonds have not been, and will not be, approved by the United States Securities and Exchange the Company for any investor's particular situation must be
Slide 4: Important information and disclaimer (3/3)
Important information and disclaimer (3/3) Please see the application form for further applicable selling and transfer restrictions. Any investment in the Company involves inherent risks and is suitable only for investors who understand the risks associated with this type of investment and who can a
Slide 5: Summary of risk factors (1/3)
Summary of risk factors (1/3) Investing in bonds and other securities issued by the Company involves inherent risks, and a number of risk factors may adversely affect the Company. Potential investors should consider, among other things, the Risk Factors set out in this Presentation before making an
Slide 6: Summary of risk factors (2/3)
Summary of risk factors (2/3) RISKS RELATED TO THE BUSINESS IN WHICH WE OPERATE (CONTINUATION) – We may not be able to hire and retain enough sufficiently trained personnel to support our operations. – Increases in labour costs, potential labour disputes and work stoppages could negatively affect ou
Slide 7: Summary of risk factors (3/3)
Summary of risk factors (3/3) RISKS RELATED TO THE OFFERING AND THE BONDS – The Company is a holding company and is dependent upon cash flow from its subsidiaries to meet its obligations, in general and under the Bonds. – Risk of being unable to pay interest and principal on its indebtedness, includ
Slide 8: Agenda
Agenda 1. Transaction overview 2. Executive summary 3. Business overview 4. Market overview 5. Financial performance 6. Risk factors 7. Appendix
Slide 9: Transaction overview
Transaction overview B- HOLDING’
Slide 10: Transaction summary
Transaction summary Background and sources & uses Group structure and pro forma capital structure1 – B2Holding ASA (the “Issuer” or the “Company”) is a debt solutions provider B2H03-05 Sr. unsec. EUR 600m specialized in investing in, and the recovery of, non-performing unsecured and B2Holding ASA (N
Slide 11: B2Holding ASA with improved rating by Moody's and S&P
B2Holding ASA with improved rating by Moody’s and S&P Rating – As of November, upgraded outlook from both rating agencies: CFR1 Outlook Bond Rating2 agency • S&P upgraded from Stable to Positive • Moody’s upgraded from Negative to Stable Moody's Ba3 Stable B1 – Further improvement in rating expected
Slide 12: Summary of key terms and conditions for the unsecured bond
Summary of key terms and conditions for the unsecured bond Issuer: B2Holding ASA Status of the bonds: Senior unsecured CFR (S&P / Moody’s): B+ / Ba3 Initial amount: EUR 300 million Borrowing limit: EUR 400 million Use of proceeds: Refinancing (incl. a bridge facility of EUR 50m) and general corporat
Slide 13: Today's presenters
Today’s presenters Erik Johnsen André Adolfsen Rasmus Hansson Chief Executive Officer Chief Financial Officer Head of Commercial Strategy & Investor Relations 13 B2Holding ASA Bond Investor Presentation, November 2021
Slide 14: Investment highlights
Investment highlights Attractive industry with – Attractive industry with significant barriers to entry sound market outlook – Expected increased supply from vendors represent growth opportunities going forward – Favorable market outlook with increased demand for B2H’s services across geographies Le
Slide 15: Executive summary
Executive summary B- HOLDING’
Slide 16: Resilient and flexible business model proven through Covid-19
Resilient and flexible business model proven through Covid-19 Organization & ESG – Strengthened management team and streamlined organizational structure – Commitment to ESG showing results – 3rd party confirmation and validation Operational – Unsecured collections: Continued positive trend with over
Slide 17: Recently renewed management and streamlined organization
Organization & ESG Recently renewed management and streamlined organization CEO 9 yrs Erik J. Johnsen Legal & CFO Investments 8 yrs 10 yrs Compliance 2 yrs André Adolfsen Endre Solvin-Witzø Cecilie Kjelland Commercial Personnel & 7 yrs Risk 17 yrs Strategy & IR 8 yrs Improvement Jeremi Bobowski Rasm
Slide 18: ESG commitment showing results
Organization & ESG ESG commitment showing results Substantially improved the ESG Risk rating from Sustainalytics, ESG Risk rating 9.3 ranking us at the top of our industry and within the top 1 % of rated companies globally – B2Holding is considered to be at negligible ESG risk: Negligible Risk • Low
Slide 19: Collection performance and improvements
Operational improvements Collection performance and improvements Unsecured collection performance REOs sold 4800 110% +30% Book Value 4500 105% 4200 159 Sales Proceeds 3900 102% 3 698 3 715 105% 3 506 3600 102% 3300 99% 100% 122 3000 2 786 2700 2400 100% 100% 100% 100% 95% 2100 1800 +51% 1500 90% 12
Slide 20: Sustained lower cost base while maintaining high collection activity
Effectiveness & efficiency Sustained lower cost base while maintaining high collection activity – Improved operational efficiency and effectiveness L12M Gross Collections1) L12M Operating expenses 2) 6,000 2,000 – Higher amicable collections driven by AI efficiency initiatives 5,659 resulting in low
Slide 21: Improved cash earnings, investment capacity and deleveraging
Investments & Capital funding Improved cash earnings, investment capacity and deleveraging Investments Cashflow L12M to Q3 2021 Additional investment capacity Cash earnings NOKm NOKm Increase 669 3,827 Decrease -48 Total 516 503 438 437 -1,087 264 237 204 192 220 2,670 -22 -779 Q3'20 Q4'20 Q1'21 Q2'
Slide 22: Key benefits of Co-investment partnership
Investments & Capital funding Key benefits of Co-investment partnership Intention and rationale Key benefits expected – Monetizing part of the secured back book today at book value – Investment partners to fund part of our back book in countries with pre- dominantly secured portfolios – Reduce timin
Slide 23: Improved operational performance & strengthened financial structure
Stronger and better positioned than pre-pandemic Improved operational performance & strengthened financial structure Key improvements Credit outlook triggers Deleveraging Lev.ratio – Operational 3.4x 3.2x 3.2x 3.0x improvements 2.9x 2.6x 2.5x – Extension of maturity 2.4x profile – Increased effectiv
Slide 24: Business overview
Business overview B- HOLDING’
Slide 25: This is B2Holding
This is B2Holding NOKm YTD Q3’21 YTD Q3’20 Change % SEE Net revenues 2,310 2,264 2% 14% Adjusted EBIT 1,037 883 17% WE NE 12% Total ERC 41% Adjusted EBIT Margin 45% 39% 5.8pp NOK EBIT 1,042 869 20% CE 19.7bn 17% ERC 19,744 24,616 -20% Pol 16% Gross Collection 4,170 4,345 -4% #FTEs 2,037 2,276 -10% 2
Slide 26: Resilient & flexible business model during Covid-19
Resilient & flexible business model during Covid-19 Unsecured collections performance 2700 115% Collection Performance % 110% – Maintained stable collection performance throughout the 2400 102% 102% 103% 2100 101% 101% 105% pandemic 99% 100% 1800 93% 95% – Covid-19 actions taken decisively: work fro
Slide 27: Strong historical financial performance
Strong historical financial performance Gross collections1 Net revenue1 Gross Collection Portfolio Acquisitions 10,000 Other Profit from JV Portfolios 9,500 9,000 – Strong collection 8,500 8,000 3,095 3,142 7,500 2,906 2,874 performance in all asset 6,380 7,000 516 571 5,659 6,500 classes 5,425 5,48
Slide 28: Markets expected to normalize during 2022
Markets expected to normalize during 2022 Market pipeline increasing Funding and investments – More activity observed; expect 2022 to become a more – Currently in advanced discussions with reputable normalized year institutional investment partners aiming to establish a co-investment partnership pre
Slide 29: A disciplined and interacting investment decision process
A disciplined and interacting investment decision process Transparent information for decision makers • Constant pipeline update • Available data on all portfolios Investment Decision Mandate EUR 20m + Forward looking process – starting with pipeline on day 1 BoD • Fixed weekly pipeline review day •
Slide 30: Committed to ESG
Committed to ESG Highlights 6 ESG strategic lines Improvement of debtor knowledge – Reviewed materiality analysis for 2020 01 and satisfaction – Annual report 2020 included the first sustainability report based on GRI standards 02 Responsibility in our value chain – Initiated solicited ESG rating pr
Slide 31: ESG commitment showing results
ESG commitment showing results Substantially improved the ESG Risk rating from Sustainalytics, ESG Risk rating 9.3 ranking us at the top of our industry and within the top 1 % of rated companies globally – B2Holding is considered to be at negligible ESG risk: Negligible Risk • Low exposure of materi
Slide 32: Core priorities going forward
Core priorities going forward Investment Operations Investments partnerships – Sustainable lower cost base – Strong balance sheet will enable – Positive development in with several cost saving us to harvest from an expected servicing revenues, but initiatives carried out favourable market going unta
Slide 33: Market overview
Market overview B- HOLDING’
Slide 34: NPL industry – an important part of the economic system
NPL industry – an important part of the economic system Regulated business, EU Regulators regulators moving towards more standardized framework “Solving the problem of Non-Performing Loans Helping consumers is not just god for banks, Consumers NPL Banks manage their debt it benefits all of us” - Eur
Slide 35: Overview of the European NPL market (I/II)
Overview of the European NPL market (I/II) B2Holding covers ~75% of the total EU NPL market EU banks NPL per country (Q2’21) Total volume of bank NPLs in Europe exceed EUR 400bn. 140 Three largest markets account for +60% as of Q2’21 16,00% 15% 118 NPLs (EURbn) NPL ratio (%) 14,00% 120 12,00% 100 83
Slide 36: Overview of the European NPL market (II/II)
Overview of the European NPL market (II/II) B2 geographically well-positioned to capitalize on positive development in post-Covid NPLs YoY Stage 2 loans increase (+) / decrease (-) in B2 markets1 – NPL ratios in Europe have artificially declined in the aftermath Hungary of Covid-19, mainly due to 51
Slide 37: One of the leading pan-European debt collectors
One of the leading pan-European debt collectors EBITDA (EURm) Cash EBITDA (EURm) 120m ERC (EURm) Intrum Intrum 849 Intrum 1,173 6,006 EOS 312 EOS N/A EOS N/A Lowell 227 Lowell 576 Lowell 4,053 Cabot 205 Cabot 390 Cabot 2,999 Kruk 181 Kruk 312 Kruk 1,716 PRA 179 PRA 666 PRA 2,660 doValue 160 doValue
Slide 38: Highly diversified client base
Highly diversified client base – Diversified set of debt sellers across the financial industries, covering banks, in-store credit, credit cards, micro loans and leasing companies, as well as other industries, including utility and telecommunication companies – Reactive commercial strategy to seize n
Slide 39: Financial performance
Financial performance B- HOLDING’
Slide 40: Third quarter 2021 summary
Third quarter 2021 summary 2021 2020 % 2021 2020 % 2020 – Strong unsecured collections at NOK million Q3 Q3 Δ YTD YTD Δ Full Year 103.3% of the latest forecast Net revenues 792 813 -3% 2,310 2,264 2% 3,095 Adj. EBIT 385 369 4% 1,037 883 17% 1,246 – Secured recoveries above the Adj. EBIT % 49% 45% 3
Slide 41: Collection Performance
Collection Performance Unsecured collection performance REOs sold 1000 923 927 934 949 110% +30% Book Value 905 102% 103% 105% 159 Sales Proceeds 800 102% 101% 101% 100% 122 600 100% 100% 100% 100% 100% 95% 400 +51% 90% 40 200 85% 27 0 80% Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 L12M Q3 2021 Collection Perfor
Slide 42: Sustained lower cost base while maintaining high collection activity
Sustained lower cost base while maintaining high collection activity Comments Lower cost base L12M Gross Collections 1) L12M Operating expenses 2) – Accumulated savings compared to Q1 2020 of NOK 402m 6,000 2,000 5,851 – Sustained lower cost base despite high collection activity 5,715 5,720 5,660 –
Slide 43: Strong secured & REO monetization resulting in solid cash earnings
Strong secured & REO monetization resulting in solid cash earnings Investments Cash flow Q3 2021 Additional investment capacity Cash earnings NOKm NOKm Increase 669 931 Decrease 27 Total 516 503 438 437 - 237 264 237 204 192 220 711 -9 - 208 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 503 Deleveraging Lev.ratio L
Slide 44: Portfolio investments and Estimated Remaining Collections (ERC)
Portfolio investments and Estimated Remaining Collections (ERC) ERC incl. REO book value Comments NOKm NPL REOs Gross Collection & Net Margin REOs – ERC of NOK ~20.9bn as of Q3 2021, of which ~75% unsecured claims – Northern Europe (NE1) represents the most important geography with 41% of ERC, follo
Slide 45: Deleveraging and lower cost of funding
Deleveraging and lower cost of funding Decreased leverage following strong cash flow Interest expenses reduced NOKm Net interest-bearing debt Interest expenses 1) – Net interest-bearing debt reduced by NOK 2.8bn year-on-year • NOK 1.9bn adjusted for FX effects – Interest expenses reduced by NOK 25m
Slide 46: Favourable development in headroom to covenants
Favourable development in headroom to covenants Comments Financial covenants Leverage ratio Interest cover ratio – Solid headroom to both earnings- and value-based covenants 8.0x 6.2x 5.4x – Bond maintenance covenants: 4.8x 5.1x 4.0x 4.0x • Leverage ratio <4x (NIBD to cash EBITDA) 3.5x 4.0x 2.9x 3.0
Slide 47: Conservative maturity profile and strong liquidity position
Conservative maturity profile and strong liquidity position Funding profile Comments EUR millions Outstanding bonds Utilised RCF Utilised bridge facility Treasury bonds Unutilised RCF B2H06 – Bond 2 repaid in October • Repayment via a combination of the RCF and the Bridge Facility I+3.25- • Cost of
Slide 48: Risk factors
Risk factors B- HOLDING’
Slide 49: Risk factors (1/9)
Risk factors (1/9) An investment in the Bonds involves risks. If any of the events described below actually occurs, our business, results of future we will be able to obtain interim funding by making other borrowings. A lack of cash flow could operations, financial condition or prospects could be ma
Slide 50: Risk factors (2/9)
Risk factors (2/9) Our operations are highly dependent upon access to, and the functioning and integrity of, our core IT applications, such as personal information of customers, including names and account numbers, locations, contact systems and infrastructure. information and other account specific
Slide 51: Risk factors (3/9)
Risk factors (3/9) The value of our existing portfolios may deteriorate, or we may not be able to collect sufficient amounts on our results of operation and financial condition. portfolios to take advantage of opportunities for portfolio purchases as they arise in the market. Failure to successfully
Slide 52: Risk factors (4/9)
Risk factors (4/9) Our senior management team members and key employees are important to our continued success and the loss of A material failure in banking systems could negatively affect our business. one or more members of our senior management team or one or more of our key employees could have
Slide 53: Risk factors (5/9)
Risk factors (5/9) Our collections may decrease and/or the timing on when we collect may be delayed if the number of consumers We are subject to prevailing tax laws in every jurisdiction we operate and there can be no assurance that our becoming subject to personal insolvency procedures increases. u
Slide 54: Risk factors (6/9)
Risk factors (6/9) We will require a significant amount of cash to meet our obligations under our indebtedness, a substantial amount We are exposed to interest rate risk. of which will mature prior to the Bonds, and to sustain our operations, which we may not be able to generate or raise. Fluctuatio
Slide 55: Risk factors (7/9)
Risk factors (7/9) RISKS RELATED TO THE OFFERING AND THE BONDS Your right to receive payments under the Bonds will be effectively subordinated to claims of our existing and future secured creditors. The Company is a holding company and is dependent upon cash flow from its subsidiaries to meet its ob
Slide 56: Risk factors (8/9)
Risk factors (8/9) The Bonds will be structurally subordinated to the liabilities and preference shares (if any) of our subsidiaries that Agreement will depend on our access to funds at such time, and we may not be able to secure access to do not guarantee the Bonds. enough cash to finance the repur
Slide 57: Risk factors (9/9)
Risk factors (9/9) Transfer of the Bonds will be restricted, which may adversely affect the value of the Bonds. and trading of the Bonds, which could have a material adverse effect on our business, financial condition and results of operations. Because the Bonds have not been, and are not required t
Slide 58: Appendix
Appendix B- HOLDING’
Slide 59: Pan-European exposure with large share of unsecured NPLs
Pan-European exposure with large share of unsecured NPLs1 Northern Europe Poland Western Europe Central Europe South East Europe Market position Top 3 Top 3 Top 10 Top 3 Top 3 ERC (NOK 19.7bn) NOK 8.16bn NOK 3.25bn NOK 2.31bn NOK 3.31bn NOK 2.71bn 1% 7% 13% % of ERC 37% 36% Secured vs. Unsecured 63%
Slide 60: Debt collection 1.0.1
Debt collection 1.0.1 The Credit Management Services value chain Adjacent activities Portfolio Invoicing Invoice purchase 3rd party debt Credit services investments & Consumer credit Savings accounts services and financing collection collection Portfolio investments and collection/ Selected debt ven
Slide 61: ERC development
ERC development Development in total gross ERC1) Forward 120m ERC profile by year1) NOKm NOKm 26,528 6,048 25,298 24,616 23,809 Pol 23,100 22,262 20,840 20,440 19,744 NE 3,650 15,264 CE 2,462 9,489 1,854 1,392 WE 1,069 804 592 440 SEE 340 2016 2017 2018 2019 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21
Slide 62: Portfolio diversification
Portfolio diversification Year 120m Total Unsecured 1 2 3 4 5 6 7 8 9 10 ERC ERC Pol 809 600 435 331 254 190 141 103 79 60 3,003 3,159 NE 1,507 1,255 1,037 864 711 585 486 402 330 273 7,450 8,402 CE 304 261 213 164 127 90 52 24 14 7 1,258 1,262 WE 222 185 151 108 84 66 45 27 6 1 893 893 SEE 571 505
Slide 63: Financial risk management
Financial risk management Interest rate risk Net borrowing basket SEK – Translational balance sheet exposure to main currencies hedged by Currency derivatives PLN 12% • Borrowing in relevant currencies to match expected future cash flows from loans and receivables DKK ◦ Bond loans in EUR and RCF dra
Slide 64: +70% surge in share price the last year
+70% surge in share price the last year Successful public listing Top shareholders1) # Shareholder Percentage – The shares were listed on NOTC, the Norwegian Over-The- 1 PRIORITET GROUP AB 12.91 % Counter Market in December 2014 2 RASMUSSENGRUPPEN AS1) 12.53 % 3 VALSET INVEST AS 6.34 % – In June
Slide 65: Organizational overview
Organizational overview Board of Directors Audit Remuneration Committee Committee CEO Erik J. Johnsen Commercial Legal & Financial Investments Risk Strategy & IR Compliance Internal André Adolfsen Endre Solvin-Witzø Jeremi Bobowski Rasmus Hansson Cecilie Kje
Slide 66: Income statement
Income statement Income Statement NOKm 2018 2019 2020 L12M Q3'21 Interest income from purchased loan portfolios 2 537 2 713 2 765 2 463 Net credit gain/(loss) from purchased loan portfolios - 58 - 400 -230 16 Profit from shares in associated parties/joint ventures and participation loan/notes 48 64
Slide 67: Balance sheet
Balance sheet Balance Sheet NOKm 31.12.2018 31.12.2019 31.12.2020 30.09.2021 Deferred tax asset 97 189 323 279 Goodwill 785 778 824 801 Tangible and intangible assets 274 363 330 279 Investments in associated companies and joint ventures 12 387 349 298 Purchased loan portfolios 13 346 13 420 13 033
Slide 68: Cash flow statement
Cash flow statement Cashflow NOKm FY 2018 FY 2019 FY 2020 L12MQ3'21 Cash flows from operating activities Profit for the period before tax 808 165 411 751 Adjustment for non-cash items: Amortisation/revaluation of purchased loan portfolios 1,518 2,889 2,743 2,596 Repossession of collateral assets - 6
Slide 69: Definitions
Definitions – Actualisation: The difference between actual and forecasted collections for purchased loan portfolios for the – Cost other revenues: Cost other revenues is all external and internal operating costs related to the Group’s other reporting period. business areas. – Adjusted EBIT (Adj. EBI
Slide 70: Definitions (cont'd)
Definitions (cont’d) – Interest income from purchased portfolios: Interest income from purchased loan portfolios is the calculated – Net revenues: Net revenues are the Total revenues reported less the Cost of collateral assets sold, including amortised cost interest revenue from the purchased loan p
Slide 71: IR contact
IR contact B2Holding ASA Rasmus Hansson Stortingsgaten 22 Head of Commercial Strategy P.O.Box 1726 Vika N-0121 Oslo and Investor Relations +47 952 55 842 www.b2holding.no rh@b2holding.no +47 22 83 39 50 post@b2holding.no
B2Holding — Debt Investor Presentation (November 2021) on 6ix