Credit Acceptance Announces Pricing of $500.0 Million Senior Notes Offering

Rhea-AI Summary

Credit Acceptance (Nasdaq: CACC) has announced the pricing of $500.0 million in senior notes due 2030 at a 6.625% interest rate. This represents an increase from the previously announced $400.0 million offering. The notes will be issued at 100% of principal value, with closing expected around February 28, 2025.

The company plans to use the proceeds to redeem all of its outstanding $400.0 million 6.625% senior notes due 2026 and for general corporate purposes. Pending final allocation, the funds may be invested in short-term instruments or used to repay revolving credit facility borrowings. The notes are being offered exclusively to qualified institutional buyers under Rule 144A of the Securities Act of 1933.

Positive

• Successful upsizing of note offering from $400M to $500M indicates strong institutional investor demand
• New notes maintain same interest rate (6.625%) while extending maturity to 2030
• Additional $100M provides extra liquidity for corporate purposes beyond refinancing existing debt

Negative

• Company continues to carry substantial debt load with $500M new notes issuance

Insights

Fixed Income Analyst

The successful pricing of $500 million senior notes at 6.625% reveals strong institutional demand, evidenced by the $100 million increase from the initial offering size. This pricing achievement is particularly noteworthy in the current interest rate environment, as the company managed to secure the same coupon rate as its 2026 notes while extending maturity by four years to 2030.

The refinancing strategy demonstrates prudent liability management, effectively eliminating near-term refinancing risk while maintaining stable interest expenses. The additional $100 million raised provides enhanced financial flexibility, with the option to either invest in short-term instruments or reduce revolving credit facility utilization. This flexibility could prove valuable given the current uncertain economic environment in the auto financing sector.

The Rule 144A offering structure, to qualified institutional buyers, typically allows for faster execution and reduced disclosure requirements compared to registered public offerings. The maintenance of the same coupon rate suggests institutional investors remain confident in Credit Acceptance's credit profile and business model, despite broader industry challenges in the auto financing sector.

The timing of this refinancing is strategic, addressing the 2026 maturity well in advance and potentially getting ahead of any market volatility or interest rate movements that could affect financing costs in the coming years. The successful execution and upsized offering indicate strong market access, which is important for specialty finance companies that rely on regular market issuance to support their business model.

Southfield, Michigan , Feb. 13, 2025 (GLOBE NEWSWIRE) -- Credit Acceptance Corporation (Nasdaq: CACC) (referred to as the “Company”, “Credit Acceptance”, “we”, “our”, or “us”) announced today that it priced $500.0 million aggregate principal amount of its 6.625% senior notes due 2030 (the “notes”) in its previously announced offering at an issue price of 100% of the principal amount of the notes. The $500.0 million aggregate principal amount of the notes represents an increase in the offering size from the previously announced $400.0 million. The closing of the sale of the notes is expected to occur on or about February 28, 2025, subject to customary closing conditions. We intend to use the net proceeds from the offering of the notes (1) to fund the redemption of all of our $400.0 million outstanding 6.625% senior notes due 2026 (the “2026 notes”), in accordance with the terms of the indenture governing the 2026 notes, and the payment of fees and expenses in connection therewith and (2) for general corporate purposes. Pending this application of the net proceeds from the offering of the notes, the net proceeds may be invested in short-term investments or applied to repay borrowings under our revolving credit facility without reducing the lenders’ commitments thereunder.

The notes are being offered only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The notes will not be registered under the Securities Act and may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from registration requirements. This press release does not constitute a notice of redemption with respect to the 2026 notes or an obligation to issue any such notice of redemption.

Cautionary Statement Regarding Forward-Looking Information

Statements in this release that are not historical facts, such as those using terms like “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “assume,” “forecast,” “estimate,” “intend,” “plan,” “target,” or similar expressions, and those regarding our future results, plans, and objectives, are “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements, which include statements concerning completion of the offering of the notes and use of net proceeds therefrom, represent our outlook only as of the date of this release. Actual results could differ materially from these forward-looking statements since the statements are based on our current expectations, which are subject to risks and uncertainties. Factors that might cause such a difference include, but are not limited to, the factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 12, 2025, and other risk factors listed from time to time in our reports filed with the SEC. We do not undertake, and expressly disclaim any obligation, to update or alter our statements whether as a result of new information or future events or otherwise, except as required by applicable law.

FAQ

What is the interest rate and size of Credit Acceptance's (CACC) new senior notes offering?

Credit Acceptance's new senior notes offering is $500.0 million with a 6.625% interest rate, due in 2030.

When will CACC's new $500M senior notes offering close?

The closing of the $500M senior notes offering is expected to occur on or about February 28, 2025, subject to customary closing conditions.

How will Credit Acceptance (CACC) use the proceeds from its $500M notes offering?

CACC will use the proceeds to redeem all $400M of its outstanding 2026 notes and for general corporate purposes. Temporarily, funds may be invested in short-term investments or used to repay revolving credit facility borrowings.

Who is eligible to purchase CACC's new $500M senior notes?

The notes are being offered only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933.

How much did Credit Acceptance (CACC) increase its notes offering from the initial announcement?

CACC increased its notes offering by $100 million, from the initially announced $400 million to $500 million.