Encore Capital Group, Inc. Announces Proposed Convertible Senior Notes Offering
28 February 2023 - 11:12PM
Encore Capital Group, Inc. (Nasdaq: ECPG) (“Encore”) today
announced its intention to offer, subject to market and other
conditions, $175.0 million aggregate principal amount of
convertible senior notes due 2029 (the “notes”) in a private
offering to persons reasonably believed to be qualified
institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended (the “Securities Act”). Encore also expects to
grant the initial purchasers of the notes a 30-day option to
purchase up to an additional $26.25 million aggregate principal
amount of notes solely to cover over-allotments, if any.
The notes will be senior, unsecured obligations
of Encore, will accrue interest payable semi-annually in arrears
and will mature on March 15, 2029, unless earlier repurchased or
redeemed by Encore or converted. Noteholders will have the right to
convert their notes in certain circumstances and during specified
periods. Encore will settle any conversions by paying or
delivering, as the case may be, cash and, if applicable, shares of
Encore’s common stock. The notes will be redeemable, in whole or in
part, for cash at Encore’s option at any time, and from time to
time, on or after March 20, 2026 and on or before the 40th
scheduled trading day immediately before the maturity date, but
only if the last reported sale price per share of Encore’s common
stock exceeds 130% of the conversion price for a specified period
of time. The redemption price will be equal to the principal amount
of the notes to be redeemed, plus accrued and unpaid interest, if
any, to, but excluding, the redemption date. The interest rate,
initial conversion rate and other terms of the notes will be
determined at the pricing of the offering.
Encore intends to use a portion of the net
proceeds from the offering to fund the cost of entering into the
capped call transactions described below. Encore intends to use the
remainder of the net proceeds from the offering (i) to effect the
purchase and surrender for cancellation of a portion of Encore
Capital Europe Finance Limited’s 4.500% exchangeable senior notes
due 2023 (the “2023 Exchangeable Notes”) in privately negotiated
transactions effected through one of the initial purchasers or its
affiliate concurrently with the pricing of the offering (the “2023
Exchangeable Notes repurchase”), (ii) to repurchase shares of
Encore’s common stock in privately negotiated transactions effected
through one of the initial purchasers or its affiliate concurrently
with the pricing of the offering (the “common stock repurchase
transactions”) and (iii) for general corporate purposes, which may
include working capital, capital expenditures, acquisitions or
repayment or repurchase of outstanding debt, which may include
Encore’s global senior credit facility, its 3.250% convertible
senior notes due 2025 and any remaining 2023 Exchangeable Notes,
and additional repurchases of Encore’s common stock from time to
time following the offering. If the initial purchasers exercise
their over-allotment option, then Encore intends to use a portion
of the additional net proceeds from the sale of the additional
notes to fund the cost of entering into additional capped call
transactions.
In connection with the 2023 Exchangeable Notes
repurchase, Encore expects to enter into agreements with the
relevant financial institutions (the “existing option
counterparties”) to terminate a portion of the capped call option
transactions that Encore previously entered into when it issued the
2023 Exchangeable Notes (the “existing option termination
transactions”) in a notional amount corresponding to the amount of
the 2023 Exchangeable Notes that are purchased in the 2023
Exchangeable Notes repurchase. In connection with the existing
option termination transactions, Encore will receive cash payments
in amounts that depend in part on the market price of Encore’s
common stock at the pricing of the offering.
In connection with the pricing of the notes,
Encore expects to enter into privately negotiated capped call
transactions (the “capped call transactions”) with one or more of
the initial purchasers or their affiliates and/or other financial
institutions (the “option counterparties”). The capped call
transactions are expected generally to reduce the potential
dilution to Encore’s common stock upon any conversion of the notes
and/or offset any potential cash payments Encore is required to
make in excess of the principal amount of converted notes, as the
case may be, with such reduction and/or offset subject to a cap. If
the initial purchasers exercise their over-allotment option, Encore
expects to enter into additional capped call transactions with the
option counterparties.
Encore expects that certain purchasers of the
notes may seek to sell shares of Encore’s common stock in the
market and/or enter into various derivative transactions with
respect to Encore’s common stock to establish hedge positions with
respect to the notes. Encore also expects that holders of the 2023
Exchangeable Notes who sell those notes in the 2023 Exchangeable
Notes repurchase may unwind or enter into various derivative
transactions with respect to Encore’s common stock and/or purchase
shares of Encore’s common stock in the market to unwind their
existing hedge positions in connection with the relevant 2023
Exchangeable Notes. In connection with the existing option
termination transactions, Encore expects that the existing option
counterparties and/or their respective affiliates may sell shares
of Encore’s common stock in secondary market transactions and/or
unwind or enter into various derivative transactions with respect
to Encore’s common stock. Encore also expects the option
counterparties to purchase shares of Encore’s common stock and/or
enter into various derivative transactions with respect to Encore’s
common stock concurrently with or shortly after the pricing of the
notes in connection with the capped call transactions. As noted
above, Encore also intends to purchase shares of Encore common
stock in the common stock repurchase transactions. Encore cannot
predict the net effect of the transactions described above on the
market price of Encore’s common stock, the terms of the notes
(including the initial conversion rate and conversion price of the
notes) or the market price of the notes.
In addition, the option counterparties and/or
their respective affiliates may modify their hedge positions by
entering into or unwinding various derivatives with respect to
Encore’s common stock and/or purchasing or selling Encore’s common
stock or other securities of Encore in secondary market
transactions following the pricing of the notes and prior to the
maturity of the notes (and (x) are likely to do so during any
observation period related to a conversion of notes or following
any repurchase of notes by Encore in connection with any optional
redemption or fundamental change and (y) are likely to do so
following any repurchase of notes by Encore other than in
connection with any optional redemption or fundamental change if
Encore elects to unwind a corresponding portion of the capped call
transactions in connection with such repurchase). This activity
could cause or avoid an increase or a decrease in the market price
of Encore’s common stock or the market value of the notes, which
could affect holders’ ability to convert the notes and, to the
extent the activity occurs during any observation period related to
a conversion of notes, it could affect the amount and value of the
consideration that holders will receive upon conversion of the
notes.
The offer and sale of the notes and any shares
of common stock issuable upon conversion of the notes have not
been, and will not be, registered under the Securities Act or any
state securities laws, and the notes and any such shares cannot be
offered or sold except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act and state securities laws. This press release does
not constitute an offer to sell, or the solicitation of an offer to
buy, the notes or any shares of common stock issuable upon
conversion of the notes, nor will there be any sale of the notes or
any such shares, in any state or other jurisdiction in which such
offer, sale or solicitation would be unlawful. Any offer of the
securities will be made only by means of a private offering
memorandum.
About Encore
Encore is an international specialty finance
company that provides debt recovery solutions and other related
services across a broad range of financial assets. Through its
subsidiaries around the globe, Encore purchases or services
portfolios of receivables from major banks, credit unions and
utility providers.
Headquartered in San Diego, Encore is a publicly
traded Nasdaq Global Select Market company (ticker symbol: ECPG)
and a component stock of the Russell 2000, the S&P Small Cap
600 and the Wilshire 4500.
Forward-Looking Statements
This press release includes forward-looking
statements, including statements regarding the completion, timing
and size of the proposed offering, the intended use of the
proceeds, the terms of the notes being offered and the anticipated
terms of, and the effects of entering into, the capped call
transactions described herein. Forward-looking statements represent
Encore’s current expectations regarding future events and are
subject to known and unknown risks and uncertainties that could
cause actual results to differ materially from those implied by the
forward-looking statements. Among those risks and uncertainties are
market conditions, including market interest rates, the trading
price and volatility of Encore’s common stock and risks relating to
Encore’s business, including those described in periodic reports
that Encore files from time to time with the U.S. Securities and
Exchange Commission. Encore may not consummate the proposed
offering described in this press release and, if the proposed
offering is consummated, cannot provide any assurances regarding
the final terms of the notes or its ability to effectively apply
the net proceeds as described above. The forward-looking statements
included in this press release speak only as of the date of this
press release, and Encore does not undertake to update the
statements included in this press release for subsequent
developments, except as may be required by law.
Contact Information
Bruce ThomasEncore Capital Group, Inc.Vice President, Global
Investor Relations(858) 309-6442bruce.thomas@encorecapital.com
Encore Capital (NASDAQ:ECPG)
Historical Stock Chart
From Apr 2024 to May 2024
Encore Capital (NASDAQ:ECPG)
Historical Stock Chart
From May 2023 to May 2024