SquareTwo Financial exchanges $33.59 million additional 11 5/8% notes

By Angela McDaniels

Tacoma, Wash., July 18 – SquareTwo Financial Corp. exchanged $33,594,000 principal amount of its 11 5/8% senior second-lien notes due 2017 in a second settlement of its exchange offer, according to a company news release.

As previously reported, the exchange offer and a consent solicitation for the notes began April 28 and ended May 24.

Holders tendered $267,755,000, or 92.33%, of the notes in the exchange offer, and the company initially accepted $224,811,000 of these notes.

The initial settlement date was May 24, the second settlement date was July 18, and the company expects the third and final settlement to occur by Aug. 19.

For each $1,000 principal amount of 11 5/8% notes, the company is issuing $650 principal amount of term loans, including a consent payment equal to $30 principal amount of loans, and $350 initial liquidation preference of preferred stock.

The consent fee is only payable to those who tendered and provide consents by the consent payment deadline, May 13.

The company received enough consents to remove some covenants and events of default from the indenture governing the notes.

On May 25, the company said it anticipated settling notes that were not exchanged at the early settlement after the participating holders provided specific information to Cortland Capital Markets Services LLC, which is the administrative agent for the new term loans due 2019.

Recapitalization

Holders of more than 75% of the 11 5/8% notes had entered into an agreement for a proposed recapitalization of the company, which includes participation in the exchange offer, according to a prior announcement.

As part of the recapitalization, the company obtained a new $165 million credit facility consisting of a $105 million term loan and a $60 million revolving credit facility.

In addition, the company entered into a new $30 million credit facility underwritten by some holders of the 11 5/8% notes, of which $15 million was funded upon the initial settlement of the exchange offer and the remaining $15 million will be available to fund future portfolio acquisitions, subject to some conditions.

The exchange and information agent is D.F. King & Co., Inc. (866 406-2287, 212 269-5550 or squaretwo@dfking.com).

SquareTwo is a Denver-based asset recovery and management company.

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