11/20/12 Encore Capital (ECPG)

$100m (+15m) sen unsec cb coming tonight from MS. Terms: 5yr, 2-25 up 25-30%, full pctns. HAPPY MEAL UOP = $25m buyback/cb hedge/repay debt. Yet another stk+dividend CB play best suited to equity holders. $660 mkt cap portfolio manager of defaulted consumer loan & property liens. Acq TX based Propel for $186m cash in 05/12 to enter prop/tax lien market. All debt is secured & ahead of CB & ranges between L+250 & 375 4 both entities (see credit color). We’ll use 800 for 5yr sen unsec. ADV = 136k, no leaps, s/term pick up in vol but again, try realizing >30 vol on low ADV & downside. Not model trade, it is a directional equity/x/over, not cheap otherwise. We’ll default on this one. If u play, CHEAPs only.

 

Purchases defaulted consumer loan portfolios & property tax liens in the state of Texas.

PF Cash $29m

PF Debt $715m

LTM EBITDA $153m

LTM FCF $87m

Leverage 4.7x

Mkt cap $661m

Core business is defaulted consumer loans. Existed bankruptcy servicing mkt in May. Entered TX property tax lien mkt w/Propel acq in May $186m cash. All other debt is secured. New corp bank fac announced. $575m secured due 15/17 +$200m accord, L+250-300, tighter than prior. Propel has $160m fac due 2015, paying L+300-375. $75m secured notes due 2017/2019. Authorized $50m stock buyback, will use $25m of proceeds.

L+800

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