Encore Capital greenshoe increases 4% convertibles to $230 million

By Wendy Van Sickle

Columbus, Ohio, March 3 – Underwriters for Encore Capital Group Inc.’s 4% convertible notes due March 15, 2029 exercised their full $30 million greenshoe, increasing the total size of the deal to $230 million, according to an 8-K filing with the Securities and Exchange Commission.

The company priced the original $200 million of the convertibles after the market close on Feb. 28 at par at the midpoint of talk with a coupon of 4% and an initial conversion premium of 27.5%, as previously reported.

Price talk was for a coupon of 3.75% to 4.25% and an initial conversion premium of 25% to 30%.

Morgan Stanley & Co. LLC, Truist Securities Inc. and Credit Suisse Securities (USA) LLC were bookrunners for the Rule 144A deal.

The deal was upsized from $175 million with a greenshoe of $26.25 million.

The notes are non-callable until March 20, 2026 and then subject to a 130% hurdle.

They are putable upon a fundamental change.

The company repurchased $154.8 million in principal of Encore Capital Europe Finance Ltd.’s 4.5% exchangeable senior notes due 2023 for $192.5 million in privately negotiated transactions and terminated a portion of the capped call transactions entered into when the 2023 notes were issued.

In connection with the offering, the company entered into new capped call transactions with a cap price of $82.69, which represents a premium of 60% over the last reported sales price of stock.

Net proceeds will be $223.3 million with the greenshoe exercised in full.

Approximately $16.1 million or net proceeds will be used to cover the cost of the call spread.

Remaining proceeds will be used to fund a portion of the repurchase of the 4.5% exchangeable notes and for general corporate purposes, which may include the repurchase or repayment of outstanding debt, including its global senior credit facility, remaining 4.5% exchangeable notes and 3.25% convertible notes due 2025, and to repurchase stock.

Encore Capital is a San Diego-based specialty finance company.

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