Encore Capital plans $125 million seven-year convertibles to yield 2.75%-3.25%, up 22.5%-27.5%

By Rebecca Melvin

New York, March 5 - Encore Capital Group Inc. launched an offering of $125 million seven-year convertible senior notes before the market open on Wednesday that was expected to be priced after the market close.

The notes were talked at a 2.75% to 3.25% coupon and a 22.5% to 27.5% initial conversion premium, according to a syndicate source.

The Rule 144A offering has an $18.75 million greenshoe and was being sold via bookrunners Morgan Stanley & Co. LLC, Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and RBS Securities Inc.

In connection with the sale of the notes, the company planned to enter into capped call transactions with initial purchasers of the notes or their affiliates. The capped call is intended to reduce potential dilution and/or offset cash payments the company is required to make in excess of the principal upon conversion if the share price is greater than the strike price of the capped call transactions, which will initially correspond to the initial conversion price of the notes.

Proceeds are expected to be used to pay the cost of capped call transactions and for general corporate purposes, including working capital.

The notes are non-callable, with no puts.

Encore is a San Diego-based consumer accounts receivable management firm.

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