After Their Own Debt Binge, Europe Loan Collectors Seen at Risk

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Companies in one of Europe’s fastest-growing industries depend on an unsustainable business model, according to some analysts and investors, with one hedge fund going as far as calling their stock worthless, Bloomberg News reported. Arrow Global Group Plc, Intrum Justitia AB and Lowell Group Ltd., which buy overdue debt such as cellphone and credit-card bills, are funding their purchases with borrowed money instead of earnings, said Bybrook Capital, a $1.4 billion hedge fund that’s betting against them. The companies won’t be able to sustain growth if their own debt costs increase, London-based Bybrook said. Debt purchasers have taken advantage of record-low borrowing costs in Europe, selling more than 10 billion euros ($11.7 billion) of bonds since 2013, according to data compiled by Bloomberg. They’ve spent a similar amount acquiring bad loans, said Bybrook, which was founded in 2013 and is backed by Blackstone Group LP. “These companies do not make enough cash flow to grow their book based on our estimates,” Bybrook said in a presentation at a conference in Oslo last month. Read more.