Company presentation Rasmus Hansson, Head of M&A and IR – 8 January 2020
Well diversified across Europe Strategic spread across the regions GROUP REGIONS Poland 15% Northern Europe (NE) NE Total ERC 1 36% 24.7 Norway, Sweden, Q3’19 CE Denmark, Finland, Total ERC 1 24% NOKbn Latvia, Lithuania, Estonia WE SEE 12% 13% Poland Poland Poland 76 Western Europe (WE) NE EBITDA 415 170 Spain, Portugal, Italy, Q3’19 Total France NOKm EBITDA 2 CE 151 WE Central Europe (CE) SEE 28 23 Czech Republic, Central functions Slovenia, Croatia, 42 Hungary, Serbia, Bosnia NE Poland and Herzegovina and 379 601 Montenegro #FTEs 2,534 South East Europe Q3’19 WE CE #FTEs 615 (SEE) 315 SEE Greece, Romania, 582 Bulgaria, Cyprus Including the Group’s share of portfolio purchased and held in joint ventures 1) | 2 Total EBITDA include central functions 2)
Highlights Q3 2019 Key financials All-time high Gross Cash Collections and Cash EBITDA Gross Cash Collections Cash EBITDA Total revenues 880 1,386 1,062 Leverage ratio down from 3.2x (Q2 2019) to 3.0x verifying a solid debt service capacity NOK million NOK million NOK million Earnings per share NOK 0.44 Equity ratio 24.1% up from 23.4% Net profit Portfolio purchases Leverage ratio in last quarter 181 1,231 3.0x NOK million NOK million Definitions on page 14-15 | 3
Established as one of top ten European debt collectors European countries present (#) Estimated remaining collection (120m ERC, EURm) 24 5 290 23 3 783 23 3 414 11 3 120 9 2 359 8 2 302 7 1 866 6 1 1 739 1 5 1 526 5 N/A Source: Company information and J.P.Morgan Credit Management Services Valuation update 03 December 2019, all figures as of Sep-19. | 4 1 120m ERC calculated as 1.8x carrying value for KRUK; 180m ERC for Axactor
Well positioned to support the new strategic direction Northern Europe Poland Western Europe Central Europe South East Europe Market position Top 3 Top 3 Top 10 Top 3 Top 3 ERC 1) % 36 % 15% 12% 24% 13% 1% 8% 25% % of ERC 1) 31% 35% Secured vs. Secured 65% 69% Unsecured 75% 23% 92% 99% 77% Unsecured Third Party ✓ ✓ ✓ ✓ Servicing Credit Information in Consumer lending Telemarketing for Other Latvia through Takto banks in Spain 1) Including the Group’s share of portfolio purchased and held in joint ventures | 5
Access to a vast opportunity set for the future Coverage of 78% of the EU NPL stock across our 23 countries 200 50 European bank NPL per country 1 Total volume of banking NPLs in Europe exceed EUR 635bn. EURbn 180 45 Italy, France, Spain and Greece, the four largest markets, account for ca. 66% of total European NPL portfolios. 160 40 39,2% 137,2 140 35 123,7 120 30 100 25 NPLs (EURbn) NPL ratio (%) 84,4 79,2 21,5% 80 20 60 15 40 10 7,9% 8,9% 21,3 7,2% 6,8% 5,6% 3,5% 4,9% 20 4,8% 5% 2,3 1,8 10,0 2,6% 7,7 3,5 6,5 6,2 3,1% 1,8% 3,2 1,8% 2,8 NA NA NA 2,0 2,3% 1,3% 1,5 1,2 0,6 0,3 1,7% 0,2 1,6% 1,2% 0,5% 0 0% Real GDP 0.0% 1.2% 2.2% 2.0% 1.9% 1.7% 1.2% 3.1% 4.0% 0.9% 1.9% 4.6% 3.0% 3.7% 2.5% 3.5% 2.9% 3.2% 3.4% 2.8% 3.5% 2.8% 3.0% growth 2019E Unemployment change (pp.) -0.3 -0.5 -1.4 -1.5 -0.9 0.0 -0.9 -1.4 0.0 0.2 -0.3 -0.2 -0.9 -0.4 0.0 0.1 -0.6 -0.7 0.0 0.0 -0.2 -0.4 -0.8 2018 – 19E Source: EBA (Risk Dashborad), IMF World Economic Outlook (October 2019); | 6 1) Data as of June 2019
Regulatory environment: Prudential backstop Capital requirements applying to banks with NPLs on their balance sheets Bank regulation for minimum loss coverage (%) for NPLs After year 1 2 3 4 5 6 7 8 9 Secured by immovable collateral 0% 0% 25% 35% 55% 70% 80% 85% 100% Secured by movable collateral 0% 0% 25% 35% 55% 80% 100% Unsecured 0% 35% 100% The prudential backstop aim to ensure that banks set aside sufficient resources when new loans become non-performing and to create appropriate incentives to avoid the accumulation of NPLs. Its is expected that the backstop will motivate the banks to sell of NPLs more frequently, ensuring a more steady inflow of portfolios to the NPL market. | 7
Capital structure with prudent leveraging Status Staggered maturity with ample liquidity headroom Funding structure with sound leverage levels, significant financial EUR millions flexibility and supporting liquidity reserves I+3.25- E+7.50% E+7.00% E+4.25% E+4.75% E+6.35% 3.75% 510 Leverage ratio down to 3.0x - Target to stabilize below 3.0x in 2020 200 200 200 175 150 325 Positive development in the ratios covered by the waiver 2015/2020 2016/2021 2022 1 2017/2022 2018/2023 2019/2024 Public rating (Corporate Family Rating/Bond Issue) - S&P: BB-/BB- EUR 182m 2 liquidity reserves supporting further portfolio acquisitions - Moody’s: Ba3/B1 Bond Loan covenants RCF covenants Interest coverage Leverage Secured loan to value Equity Ratio 3 Total Loan to Value 4 76.5% 4.9x 4.8x 4.9x 76.2% 75.4% 73.2% 65% 4.0x 4.0x 3.2x 3.0x 3.0x 27.3% 23.5% 23.6% 24.2% 75% 23% 19% 17% 25% Covenant Q1’19 Q2’19 Q3’19 Covenant Q1’19 Q2 ’19 Covenant Q1’19 Q2’19 Q3’19 Covenant Q1’19 Q2’19 Q3’19 Covenant Q1’19 Q2’19 Q3’19 Q3’19 1) Springing maturity from March 2021 when less than EUR 175m outstanding in Bond 1 and Bond 2 2) As of 30 September 2019. Calculated as EUR 165m undrawn existing RCF plus EUR 20m undrawn overdraft plus EUR 32m cash on balance sheet less NOK 200m (EUR 20m) in cash reserves less deferred payment for portfolio purchases of EUR 15m. 3) Total Equity over Total Assets | 8 excluding book value of IFRS 16 right-of-use assets. 4) Net Debt adj. for Vendor Loan, Earn Out and FX Hedge MTM over Assets (Portfolio, JV, loan receivables, REO and goodwill)
Diverse portfolio mix – good returns regardless of money multiples Secured portfolios and forward flows provide lower cash multiples, but not lower returns Cash multiples depend on asset type Unsecured portfolios: good returns with high cash-on-cash multiples and long-term recoveries 1.8x Total 2019 Forward flow transactions: good returns with steady and predictable investment, low transaction costs and low collection costs Unsecured 36% 2.0x (one-off) Secured portfolios: good returns with high volumes and front- loaded collection curves (fast repayment) Unsecured 54% 1.8x (forward flow) 2019 purchases 1 Secured 10% 10% 1.4x Secured 2019 purchase 1 % Money Multiple Asset type 90% Unsecured 1) YTD per Q3 2019. Excluding the Group’s share of portfolio purchased and held in joint ventures | 9
Increasing share of forward flows Profitable & stable collection profile Cost efficiency and stable long-term vendor relationships ▪ Stable flow of new NPLs and low-cost, low-risk cash flows ▪ Win-win: - Vendors sell NPLs early with minimal tender and migration costs - buyers have minimal transaction cost and on-boarding effort (repeatability / automation) ▪ Share of forward flows in mature markets at 50-70% - Increasing share of forward flow transactions across geographies 59% Share of Forward Flows 48% (% of unsecured Book Value) 28% 27% 19% 14% 3% 2013 2014 2015 2016 2017 2018 YTD 2019 | 10
Partnerships for large portfolios – higher capacity, lower risk B2Holding is actively pursuing joint ventures to gain access to a larger pipeline As of today, the Group has co-investments on portfolios in Romania, Greece, Croatia and Sweden and further co-investments are under consideration. The ability to transact with reputable investors creates a unique advantage for B2Holding: 1. Flexible purchasing capacity – ability to participate in large deals across many geographies with limited equity 2. Improved returns - opportunity to leverage servicing platforms by acting as servicer of portfolios for equity partners 3. Lower risk - ability to manage the risk vs return by adjusting own exposure depending on market WACC and desired overall allocation, regardless of transaction sizes | 11
Four main focus areas going forward STRONGER FOCUS ON SECURED RECOVERIES 1 Organizational changes within secured including additional specialized resources and stronger head office involvement and oversight ▪ IMPROVE EFFICIENCY IN OPERATIONS 2 Automation of manual processes, digitalization and standardization of platforms ▪ 3 INCREASE SERVICING REVENUES THROUGH FUNDS AND JVs MANAGEMENT Improved utilization of platforms by third party capital – considerable interest for new co-investment structures ▪ FOCUS INVESTMENTS IN SELECTED GROWTH AREAS 4 Concentrate investments by targeting selected markets/areas with growth potential and competitive advantage ▪ | 12
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