Intrum Justitia Announces Unfavorable Court Ruling in Spanish Debt Buying Case

Large European ARM firm Intrum Justitia said Thursday that it has received an unfavorable court ruling in Spain regarding a dispute relating to the acquisition of a portfolio of non-performing debt in 2008.

The dispute concerns the quality of certain batches of debt, which were agreed to be acquired by Intrum Justitia at a predetermined price. Intrum Justitia subsequently declined to acquire certain batches of debt as, according to the company, the seller had materially changed the credit terms for granting loans.

Contrary to Intrum’s expectations, the court ruled in favor of the seller of the portfolio. The court verdict implies that Intrum will need to acquire certain disputed batches of debt at the originally agreed price of about $7 million, as well as reimburse the seller for accrued interest and legal costs.

Intrum noted that it does not agree with the court ruling and will initiate an appeal. However, due to the negative court ruling, the company has decided to fully provide for the estimated potential costs in its financial results for the first quarter of 2012. The additional provision will amount to about $7.5 million, of which $6.2 million will be charged as a negative revaluation against revenue.