EVERTEC Announces Successful Repricing of Existing Term Loan B
EVERTEC (NYSE: EVTC) has successfully repriced its $540 million Term Loan B (TLB), which is due in 2030. The new interest rate is set at SOFR + 325 basis points, down from SOFR + 350 basis points, reducing the cost by 25 basis points. This repricing does not affect the leverage of the company, and no other terms of the loan have been changed. Joaquin A. Castrillo-Salgado, the Executive Vice-President and CFO, highlighted the strong market demand for their debt, which has allowed EVERTEC to improve its capital structure and cash flow profile.
- Repricing reduces interest rate margins by 25 basis points from SOFR + 350 to SOFR + 325.
- No change in leverage, maintaining a stable financial stance.
- Enhanced cash flow profile and capital structure due to reduced interest expenses.
- Strong market demand for EVERTEC's debt, indicating robust creditworthiness.
- The total debt amount of $540 million remains unchanged, continuing a significant liability.
- financial maneuverability as no other terms of the TLB were revised.
Insights
Repricing of existing Term Loan B is a significant financial move for EVERTEC. The reduction in interest rate margins from SOFR + 350 basis points to SOFR + 325 basis points indicates a 0.25% decrease in interest expenses. This is leverage neutral, meaning it does not affect the company's overall debt level. It’s important to note that such a reduction will improve EVERTEC's cash flow profile, allowing the company to allocate more resources toward operational and strategic initiatives.
For retail investors, this repricing can be viewed positively because lower interest expenses directly enhance profitability. In the short term, investors may not see a drastic change in earnings, but over the long term, the savings from lower interest payments can lead to improved financial health and potentially higher dividends.
Additionally, the strong market demand for EVERTEC’s debt implies investor confidence in the company’s creditworthiness and future prospects. However, investors should remain cautious and consider the broader economic environment and interest rate trends, as future rate hikes could offset some of these benefits.
The decision to reprice the Term Loan B at a lower interest rate reflects EVERTEC’s ability to capitalize on favorable market conditions. This move signifies that the market perceives EVERTEC as a low-risk borrower, given their ability to negotiate better terms. The 25 basis point reduction, while seemingly small, can contribute substantial savings over the loan’s term, demonstrating effective financial management.
From a retail investor’s perspective, this repricing confirms the company’s strong market standing and operational stability. Investors should be aware that such financial maneuvers can signal a company’s proactive approach to managing debt and optimizing its capital structure. As a result, EVERTEC might be able to redirect the savings toward growth initiatives, potentially enhancing shareholder value in the long run.
While this is a positive development, it’s essential to monitor how EVERTEC utilizes these savings. Efficient reinvestment strategies are important to translating lower interest costs into tangible growth and returns for shareholders.
“We are pleased with the strong market demand for our debt, which provided an opportunity to further improve our capital structure and cash flow profile and demonstrates our strong performance and strong credit profile,” stated Joaquin A. Castrillo-Salgado, Executive Vice-President and Chief Financial Officer.
About EVERTEC
EVERTEC, Inc. (NYSE: EVTC) is a leading full-service transaction processor and financial technology provider in
Forward-Looking Statements
Certain statements in this earnings release constitute “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our ability to meet our guidance expectations for revenue, earnings per share, Adjusted earnings per common share, capital expenditures and effective tax rate, including for fiscal year 2023, are forward looking statements. Words such as “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” and “plans” and similar expressions of future or conditional verbs such as “will,” “should,” “would,” “may,” and “could” are generally forward-looking in nature and not historical facts.
Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: our reliance on our relationship with Popular, Inc. (“Popular”) for a significant portion of our revenues pursuant to our second Amended and Restated Master Services Agreement (“A&R MSA”) with them, and as it may impact our ability to grow our business; our ability to renew our client contracts on terms favorable to us, including but not limited to the current term and any extension of the MSA with Popular; our dependence on our processing systems, technology infrastructure, security systems and fraudulent payment detection systems, as well as on our personnel and certain third parties with whom we do business, and the risks to our business if our systems are hacked or otherwise compromised; our ability to develop, install and adopt new software, technology and computing systems; a decreased client base due to consolidations and/or failures in the financial services industry; the credit risk of our merchant clients, for which we may also be liable; the continuing market position of the ATH network; a reduction in consumer confidence, whether as a result of a global economic downturn or otherwise, which leads to a decrease in consumer spending; our dependence on credit card associations, including any adverse changes in credit card association or network rules or fees; changes in the regulatory environment and changes in macroeconomic, market, international, legal, tax, political, or administrative conditions, including inflation or the risk of recession; the geographical concentration of our business in
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Investor
Beatriz Brown-Sáenz
(787) 773-5442
IR@evertecinc.com
Source: EVERTEC
FAQ
What is the new interest rate for EVERTEC's Term Loan B?
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