Encore Capital Group Announces $100M Private Placement of Convertible Senior Notes
Encore Capital Group (NASDAQ: ECPG) today announced that it has commenced a private offering, subject to market and other conditions, of $100,000,000 aggregate principal amount of convertible senior notes due 2017 (the "notes"). In connection with the offering, the Company expects to grant the initial purchasers an option to purchase up to an additional $15,000,000 aggregate principal amount of such notes to cover sales in excess thereof. The notes will be convertible, if certain conditions are met, into cash and, in certain circumstances, shares of the Company's common stock, based on a volume-weighted average price of the common stock on each day of an observation period.
The Company intends to use:
a portion of the net proceeds from this offering to pay the cost of certain convertible note hedge transactions (described below), taking into account the proceeds to the Company of certain warrant transactions (described below); up to $25 million of the net proceeds from this offering to repurchase shares of the Company's common stock from purchasers of notes in this offering in privately negotiated transactions concurrently with this offering; approximately $61.5 million of the net proceeds from this offering to repay borrowings under the Company's revolving credit facility; and the remainder of the net proceeds from this offering, if any, for general corporate purposes. If the initial purchasers exercise their option to purchase additional notes, the Company may sell additional warrants. The Company intends to use the resulting additional proceeds of the sale of the additional notes and any additional warrants:
to pay the cost of entering into additional convertible note hedge transactions; and for general corporate purposes. In connection with the pricing of the notes, the Company expects to enter into convertible note hedge transactions with one or more of the initial purchasers (or their affiliates) and one or more other financial institutions (the "option counterparties"). The convertible note hedge transactions are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount upon conversion of the notes in the event that the market price of the Company's common stock is greater than the strike price of the convertible note hedge transactions. The Company also expects to enter into warrant transactions with the option counterparties. The warrant transactions could separately have a dilutive effect if the market price of the Company's common stock exceeds the strike price of the warrant transactions, unless the Company elects, subject to certain conditions, to settle the warrant transactions in cash. If the initial purchasers exercise their option to purchase additional notes, the Company expects to enter into additional convertible note hedge transactions and additional warrant transactions with the option counterparties.
The Company has been advised by the option counterparties that in connection with establishing their initial hedge of the convertible note hedge transactions and warrant transactions, the option counterparties or their respective affiliates expect to enter into various derivative transactions with respect to the Company's common stock and/or purchase shares of the Company's common stock in privately negotiated transactions and/or open market transactions concurrently with or shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of the Company's common stock or the notes at that time. In addition, any repurchases by the Company of its common stock from purchasers of the notes could affect the market price of the common stock concurrently with, or shortly after, the pricing of the notes.
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