By Rebecca Melvin
New York, Nov. 21 - Encore Capital Group Inc. priced $100 million five-year convertibles after the market close Tuesday at par to yield 3% with an initial conversion premium of 25%, according to a syndicate source.
The Rule 144A deal priced at the cheap end of revised coupon talk, which was 2.75% to 3%, and at the revised price point for the premium. Initial price talk was set at 2% to 2.5% for the coupon and 25% to 30% for the premium.
The deal was sold via joint bookrunners Morgan Stanley & Co. LLC as left lead, Barclays and Bank of America Merrill Lynch, and has a $15 million greenshoe.
Concurrently with the convertible offering, Encore entered into convertible note hedge and warrant transactions with initial purchasers of the bonds and option counterparties. The note hedge transactions are intended to reduce potential dilution and offset any cash payments associated with conversion.
The warrant transactions - which may contribute to share dilution - have a strike price that will initially be $44.1875 per share, and which boosts the conversion premium to 75% from the company's perspective.
Most of the proceeds, or about $61.5 million, will be used to repay borrowings under the company's revolving credit facility; about $25 million will be used to buy back shares from purchasers of the notes; about 10% will pay the cost of the convertible note hedge transactions; and any remaining proceeds will be used for general corporate purposes.
The five-year convertibles are non-callable with no puts.
Encore is a San Diego-based consumer accounts receivable management firm.
| Issuer: | Encore Capital Group Inc.
|
| Issue: | Convertible senior notes
|
| Amount: | $100 million
|
| Greenshoe: | $15 million
|
| Maturity: | Nov. 27, 2017
|
| Bookrunners: | Morgan Stanley & Co. LLC, Barclays, Bank of America Merrill Lynch
|
| Co-managers: | JMP Securities, SunTrust
|
| Coupon: | 3%
|
| Price: | Par, $1,000
|
| Yield: | 3%
|
| Conversion premium: | 25%
|
| Conversion price: | $31.56
|
| Conversion ratio: | 31.6832
|
| Call: | Non-callable
|
| Put: | No
|
| Price talk: | 2%-2.5%, up 25%-30%
|
| Pricing date: | Nov. 20, after the close
|
| Settlement date: | Nov. 27
|
| Call spread: | Yes, boosts premium to 75% from issuer's perspective
|
| Stock symbol: | Nasdaq: ECPG
|
| Stock reference price: | $25.25
|
| Market capitalization: | $631.2 million
|
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