Priority Technology Holdings, Inc. Announces Successful Completion of Debt Refinance

Rhea-AI Summary

Priority Technology Holdings (NASDAQ: PRTH) announced the successful completion of a debt refinancing, involving the repayment of approximately $170 million in preferred equity and reducing the cost of outstanding debt by 100 basis points.

The refinance included issuing a new $835 million term loan and setting up a new $70 million revolving line of credit.

The proceeds refinanced the existing $653 million term loan due April 2027, leaving $110 million in preferred equity outstanding.

The expected net leverage ratio post-transaction is approximately 4.5x.

This refinancing is anticipated to increase free cash flow by over $5.5 million and net income available to common shareholders by nearly $20 million annually.

The new debt arrangement extends the term loan maturity to May 2031, providing flexibility to execute on the company's Unified Commerce vision and deliver strong shareholder value.

Positive

• Successful debt refinance completed, reducing outstanding debt cost by 100 basis points.
• Issued a new $835 million term loan and established a $70 million revolving line of credit.
• Refinanced $653 million term loan and redeemed $170 million of preferred equity.
• Expected to increase free cash flow by over $5.5 million annually.
• Projected net income available to common shareholders to rise by nearly $20 million annually.
• Extended term loan maturity to May 2031, enhancing financial flexibility.

Negative

• Still has $110 million of preferred equity outstanding.
• New debt agreement increases overall debt load to $835 million.
• High net leverage ratio of approximately 4.5x post-transaction.

Financial Analyst

Priority Technology Holdings' recent debt refinance is significant for a few key reasons. First, the company has lowered its cost of debt by 100 basis points. This reduction directly translates to decreased interest expenses, which improves overall profitability. Lower debt costs free up more cash flow that can be reinvested in growth opportunities or used to return value to shareholders.

The term extension from 2027 to 2031 also adds financial flexibility. By pushing out the maturity date, Priority reduces short-term liquidity risk, which is a positive signal to investors who may be concerned about the company's ability to service its debt. The new term loan and revolving credit line provide ample liquidity for operational needs and strategic initiatives.

Additionally, the redemption of $170 million in preferred equity improves the equity structure. Preferred equity often carries higher costs compared to debt, so reducing this amount can enhance overall capital efficiency. Furthermore, with a net leverage ratio of approximately 4.5x, Priority is showing a balanced approach to leveraging debt to fuel growth while maintaining manageable levels of financial risk.

In summary, this refinancing transaction is strategically beneficial for Priority Technology Holdings, as it optimizes the capital structure, reduces financing costs and extends debt maturities, all of which are favorable outcomes for shareholders.

Market Research Analyst

Market perception of Priority Technology Holdings is likely to be positively influenced by this refinancing. Reducing debt costs by 100 basis points indicates strong lender confidence in the company's financial health and future prospects. This is a good sign for potential investors as it suggests that Priority is a lower risk compared to companies with higher borrowing costs.

The diversification of lenders is another strategic move that broadens Priority's financial backing, which can be particularly advantageous in volatile markets. Having a more diversified lender base can provide stability and reduce dependency on a smaller group of creditors, which can be beneficial in the event of market fluctuations.

The anticipated increase in free cash flow by $5.5 million and net income available to common shareholders by nearly $20 million annually is a substantial financial enhancement. This should result in improved earnings per share (EPS) and potentially higher stock valuations, making the company's stocks more attractive to investors.

This refinancing also aligns with the company's vision of delivering strong shareholder value through its Unified Commerce strategy. By enhancing financial stability and operational flexibility, Priority is positioning itself well to capitalize on future growth opportunities, gaining a competitive edge in the integrated payments and banking services market.

ALPHARETTA, Ga.--(BUSINESS WIRE)-- Priority Technology Holdings, Inc. (NASDAQ: PRTH) ("Priority" or the "Company"), the platform for unified commerce that delivers integrated payments and banking services at scale, today announced the successful completion of its debt refinance. The refinancing included the payoff of approximately $170 million of preferred equity and reduces the cost of the outstanding debt by 100 basis points.

As part of the transaction, Priority issued a new $835 million term loan and established a new $70 million revolving line of credit. The loan proceeds were used to refinance and reprice its existing $653 million term loan due April 2027 and redeem approximately $170 million of preferred equity leaving $110 million of preferred equity outstanding. The refinancing transaction was completed through a new credit agreement. Following this transaction, PRTH anticipates having a net leverage ratio of approximately 4.5x based.

Tim O’Leary, Chief Financial Officer, commented, “We are pleased with the overwhelmingly positive response from our existing lenders as well as new lenders who supported Priority in our refinancing. We achieved a 100 basis point reduction in our borrowing rate while diversifying our investor base and extending the term loan maturity to May 2031. The net effect of the refinancing and preferred equity redemption will increase our free cash flow by over $5.5 million while increasing net income available to common shareholders by nearly $20 million on an annualized basis. The new debt agreement also provides flexibility for Priority to continue to execute on our Unified Commerce vision with a goal of delivering strong shareholder value.”

View source version on businesswire.com: https://www.businesswire.com/news/home/20240521582532/en/

Alison Jones, alison.jones@prth.com

Source: Priority Technology Holdings, Inc.

FAQ

What did Priority Technology Holdings announce?

Priority Technology Holdings announced the successful completion of its debt refinancing.

How much preferred equity was paid off by Priority Technology Holdings?

Priority Technology Holdings paid off approximately $170 million of preferred equity.

What was the new term loan amount issued by Priority Technology Holdings?

Priority Technology Holdings issued a new $835 million term loan.

What is the new revolving line of credit established by Priority Technology Holdings?

Priority Technology Holdings established a new $70 million revolving line of credit.

What is the projected increase in free cash flow due to the refinancing?

The refinancing is projected to increase free cash flow by over $5.5 million annually.

How much is the projected increase in net income available to common shareholders?

The projected increase in net income available to common shareholders is nearly $20 million annually.

When is the new term loan maturity date?

The new term loan maturity date is May 2031.

What is the expected net leverage ratio after the refinancing?

The expected net leverage ratio after the refinancing is approximately 4.5x.