Encore Capital Group, Inc. Announces Pricing of Upsized Senior Secured Notes Offering
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The upsizing of Encore Capital Group's senior secured notes offering from $400 million to $500 million is a significant move, reflecting investor confidence and a robust demand for the company's debt instruments. The 9.250% interest rate is notably higher than current average corporate bond yields, suggesting that the market may perceive higher risk associated with this debt or that the company is willing to offer a premium to attract capital.
Investors should note that the use of proceeds to repay existing credit facility drawings indicates a refinancing strategy, potentially improving the company's debt maturity profile and liquidity. However, the increase in total debt raises questions about the long-term debt management and the interest coverage ratio, which are important for assessing the company's financial health.
The choice of a private offering to qualified institutional buyers, as opposed to a public offering, could suggest a targeted strategy by Encore Capital Group to engage with a specific investor base that is comfortable with the company's risk profile. The fact that the notes are senior secured and guaranteed by material subsidiaries implies a lower risk compared to unsecured notes, which should be attractive to debt investors.
However, the high interest rate of 9.250% in the current economic environment may indicate that investors are demanding a significant risk premium. This could be due to Encore's creditworthiness, the industry's outlook, or broader market conditions. The security of the notes by the company's assets also means that in case of default, these investors will have a claim over other creditors, which is an important consideration for risk assessment.
Encore Capital Group's decision to secure the notes with the assets of the company and its guarantors is a common practice to provide assurance to the lenders. The full and unconditional guarantee by the material subsidiaries is a strong show of confidence in the company's operational stability and future cash flows, as it suggests that these entities are also performing well enough to back the debt.
However, the high yield on the notes indicates that the market may have concerns about the company's credit risk. The intention to repay the revolving credit facility and pay transaction fees and expenses is a typical use of such proceeds, but it is essential to monitor the company's leverage ratios post-transaction to ensure that it maintains a healthy balance between debt and equity.
SAN DIEGO, March 14, 2024 (GLOBE NEWSWIRE) -- Encore Capital Group, Inc. (Nasdaq: ECPG) (the “Company”) today announced the pricing of its offering of
The notes will be senior secured obligations of the Company, and will be fully and unconditionally guaranteed on a senior secured basis by substantially all material subsidiaries of the Company. The obligations of the Company and the guarantors will be secured, together with the Company’s other senior secured indebtedness, by substantially all of the assets of the Company and the guarantors. The notes will accrue interest at a rate of
The Company intends to use the proceeds from this offering to repay drawings under its revolving credit facility (the "Global Senior Facility") and to pay certain transaction fees and expenses incurred in connection with the offering of the notes. The Company currently intends to use borrowings under the Global Senior Facility or other available sources of financing to redeem its
The offer and sale of the notes have not been, and will not be, registered under the Securities Act, and the notes may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, the notes nor will there be any sale of the notes in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful. Any offer of the securities will be made only by means of a private offering memorandum.
Forward-Looking Statements
This press release includes forward-looking statements, including statements regarding the completion, timing and size of the proposed offering, the intended use of the proceeds and the terms of the notes being offered. Forward-looking statements represent Encore’s current expectations regarding future events and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Among those risks and uncertainties are market conditions, including market interest rates, the trading price and volatility of Encore’s common stock and risks relating to Encore’s business, including those described in periodic reports that Encore files from time to time with the U.S. Securities and Exchange Commission. Encore may not consummate the proposed offering described in this press release and, if the proposed offering is consummated, cannot provide any assurances regarding the final terms of the notes or its ability to effectively apply the net proceeds as described above. The forward-looking statements included in this press release speak only as of the date of this press release, and Encore does not undertake to update the statements included in this press release for subsequent developments, except as may be required by law.
Contact Information
Bruce Thomas, Investor Relations
(858) 309-6442
bruce.thomas@encorecapital.com
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