Portfolio Recovery Ups Credit Facility by $214.5M - Analyst Blog

Leading financial services company, Portfolio Recovery Associates Inc. PRAA, recently increased its domestic revolving credit commitments by $214.5 million to $842.5 million.

The aggregate credit facility with a principal amount of $842.5 million now consists of a fully-funded term loan, a domestic revolving credit facility and a multi-currency revolving credit facility. The term loan is worth $192.5 million while domestic revolving credit facility is of $630 million, which can be fully drawn. The amount of multi-currency credit facility is $20 million, all of which is available for withdrawal.  All the three components of the credit facility under the Credit Agreement are expected to mature on Dec 19, 2017.

In Feb 2014, Portfolio Recovery entered into an agreement to acquire Norway-based Aktiv Kapital for $880 million (excluding debt). The deal is expected to culminate in the second quarter of 2014. To fund this transaction, Portfolio Recovery intends to use a combination of cash, $170 million seller financing, and $435 from Portfolio Recovery's domestic, revolving credit facility. At this juncture, the aforementioned revision in its credit facility is expected to help the company finance its acquisition uninterruptedly thereby moving closer to culmination.   

The Aktiv Kapital takeover will mark a significant achievement for Portfolio Recovery as it will help the latter become one of the largest acquirers of consumer debt with around $4.6 billion in estimated remaining collections from customers. The acquisition is also expected to help the company meet its return on equity (ROE) goal of 20% and EPS growth of 15%, going ahead.  

Portfolio Recovery has amended its credit facility time and again to strengthen its financial position so as to capitalize on forthcoming growth opportunities. Toward this end, in Aug 2013, the company increased its lenders' domestic revolving credit commitments by $35.5 million to $633 million.

Portfolio Recovery seems promising with a Zacks Rank #2 (Buy). Other players in the financial services industry, which look attractive at current levels, include Apollo Residential Mortgage, Inc. AMTG, Euronet Worldwide Inc. EEFT and FleetCor Technologies, Inc. FLT. While Apollo Residential and Euronet Worldwide carry a Zacks Rank #1 (Strong Buy), FleetCor carries the same Zacks Rank as Portfolio Recovery.