IuteCredit Europe (“ICE”), a leading European personal finance group, for reasons of commercial prudence writes down the portfolio of IuteCredit Kosovo (ICKO) to 4.9 million EUR (30 September 2019: 9.3 million EUR), since the recognition amount and timing of the collection of receivables are uncertain. IuteCredit Europe is thus taking account of the recent appointment of an official liquidator by the Central Bank of Kosovo to wind up the subsidiary, following the revocation of ICKO’s license. As a result of the liquidation process, ICKO is no longer consolidated. In addition, ICKO is after write-downs, no longer a material group company.
Interest coverage ratio (ICR) and capitalization ratio are not materially affected by the write-down and provide sufficient headroom regarding the covenants of the outstanding EUR 40 million bond. The interest coverage ratio was 2.0 (pre-write-down: 2.6), compared to the financial covenant of 1.5. The capitalization ratio amounted to 22.4% (pre-write-down: 25.0%). The capitalization ratio, in accordance with covenants, must be at least 15.0%.
The financial impact of the written-down loan portfolio in Kosovo on IuteCredit Europe’s Group performance for the full year 2019 is limited under the current circumstances, given the small size of the loan book in Kosovo before the write-down, which amounted to 13.7% of the Group’s net loan portfolio. EBITDA will only be minimally impacted. As a result of the write-down, a consolidated net profit margin of 14.0% is now expected (previously: 17.0%).
Irrespective of the write-down, a coordinated multi-disciplinary effort has been mounted with a view to restoring the business activities in Kosovo. In order to protect the company, in particular, IuteCredit’s employees, business partners, and investors, from the unexpected revocation of the license by the Central Bank of Kosovo (CBK) and the subsequent liquidation, IuteCredit Europe’s Board of Directors is considering further legal actions.
“Our decision to immediately write down the Kosovo portfolio is in the best interests of all parties as it is conservative, but also adequate under the given circumstances. While we will be maintaining our efforts to restoring the business activities in Kosovo as our first preference, we, unfortunately, cannot at the moment preclude the option to file international and domestic lawsuits against the decision of CBK, obviously without a view to continuing business in that country. Much depends on what choices are made by the local authorities. Having said that, the Kosovo events remain on a relative scale, a non-material occurrence for the Group, as after write-down, we can now return to our own daily tasks. Our daily task is the profitable growth of our Group. Our existing country operations are developing according to plan and will also show corresponding results in 2019 annual financial statements,” said Tarmo Sild, Group CEO of IuteCredit Europe.