Credit Acceptance Announces Conditional Notice of Redemption for Outstanding Senior Notes Due 2026

Rhea-AI Summary

Credit Acceptance (Nasdaq: CACC) has announced a conditional notice of redemption for its 6.625% senior notes due 2026. The company plans to redeem all outstanding $400.0 million aggregate principal amount of 2026 notes on February 28, 2025.

The redemption is contingent upon Credit Acceptance receiving proceeds of at least $400.0 million from a new offering of senior notes due 2030, which was announced on the same day. The redemption notice will be sent to noteholders by the trustee under the governing indenture.

Positive

• Company is refinancing debt with new 2030 notes, potentially extending debt maturity

Negative

• Redemption of 2026 notes is conditional on successful new note offering, indicating execution risk

Insights

Fixed Income Analyst

This strategic refinancing initiative by Credit Acceptance reveals several key implications for investors. The company is executing a sophisticated liability management operation by replacing their $400 million 6.625% 2026 notes with new 2030 notes, effectively pushing out their maturity profile by four years.

The timing of this refinancing is particularly noteworthy. With the 2026 notes still having approximately one year until maturity, CACC is proactively managing its debt structure, potentially capitalizing on current market conditions before any potential volatility or rate changes. This early refinancing approach demonstrates prudent treasury management and could help optimize their cost of capital.

The conditional nature of the redemption, requiring at least $400 million in proceeds from the new notes, serves as a risk management mechanism. This structure ensures CACC won't be caught in a situation where they've committed to redeeming old notes without securing new funding, protecting their liquidity position.

For the auto lending sector, this refinancing move signals confidence in long-term business prospects, as CACC is willing to commit to debt extending into 2030. This is particularly relevant given the current scrutiny on consumer credit quality and auto loan performance. The company's ability to execute this refinancing could also indicate strong institutional investor confidence in their business model and credit profile.

The impact on CACC's financial metrics will largely depend on the pricing of the new 2030 notes. If secured at favorable rates, this could potentially reduce interest expenses and improve debt service coverage ratios, though the extended maturity might command a slightly higher rate given the longer duration.

Southfield, Michigan, Feb. 13, 2025 (GLOBE NEWSWIRE) -- Credit Acceptance Corporation (Nasdaq: CACC) (referred to as the “Company”, “Credit Acceptance”, “we”, “our”, or “us”) announced today that it has delivered a conditional notice of redemption to the trustee for the Company’s 6.625% senior notes due 2026 (the “2026 notes”). The notice of redemption calls for the redemption of all of the outstanding $400.0 million aggregate principal amount of 2026 notes (the “redemption”) on February 28, 2025, in accordance with the terms of the indenture governing the 2026 notes. The redemption is conditioned upon the Company’s receipt, prior to the redemption date (or on the redemption date at or prior to such time as may be determined by the Company in its sole and absolute discretion), of aggregate proceeds (before initial purchasers’ discounts and commissions and other offering expenses) from the offering of the Company’s senior notes due 2030 announced today of at least $400.0 million.

A notice of conditional full redemption of the 2026 notes will be sent to holders of the 2026 notes by the trustee under the indenture governing the 2026 notes. The information concerning the terms and conditions of the redemption is provided in the notice of conditional full redemption.

This press release does not constitute a notice of redemption of the 2026 notes or an obligation to issue any such notice of redemption.

Cautionary Statement Regarding Forward-Looking Information

Statements in this release that are not historical facts, such as those using terms like “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “assume,” “forecast,” “estimate,” “intend,” “plan,” “target” and those regarding our future results, plans and objectives, are “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements, which include statements concerning the redemption of the 2026 notes, represent our outlook only as of the date of this release. Actual results could differ materially from these forward-looking statements since the statements are based on our current expectations, which are subject to risks and uncertainties. Factors that might cause such a difference include, but are not limited to, the factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 12, 2025, and other risk factors listed from time to time in our reports filed with the SEC. We do not undertake, and expressly disclaim any obligation, to update or alter our statements whether as a result of new information or future events or otherwise, except as required by applicable law.

FAQ

What is the total value of CACC's 2026 notes being redeemed?

Credit Acceptance is redeeming $400.0 million in aggregate principal amount of its 6.625% senior notes due 2026.

When is the redemption date for CACC's 2026 notes?

The redemption date is set for February 28, 2025.

What is the interest rate on CACC's 2026 notes being redeemed?

The interest rate on the 2026 notes being redeemed is 6.625%.

What condition must be met for CACC's 2026 notes redemption?

The redemption is conditional upon Credit Acceptance receiving at least $400.0 million in proceeds from its new offering of senior notes due 2030.