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EVERTEC Announces Successful Repricing of Existing Term Loan B

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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.

Positive
  • 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.
Negative
  • 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.

SAN JUAN, Puerto Rico--(BUSINESS WIRE)-- EVERTEC, Inc. (NYSE: EVTC) (“Evertec” or the “Company”) today announced that it has successfully repriced the outstanding $540 Term Loan B (TLB) due in 2030. The repricing is leverage neutral and reduces the interest rate margins applicable to the TLB to SOFR + 325 basis points, a reduction of 25 basis points from SOFR + 350 basis points. No other terms were changed on the TLB.

“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 Latin America, Puerto Rico and the Caribbean, providing a broad range of merchant acquiring, payment services and business process management services. Evertec owns and operates the ATH® network, one of the leading personal identification number (“PIN”) debit networks in Latin America. In addition, the Company manages a system of electronic payment networks and offers a comprehensive suite of services for core banking, cash processing and fulfillment in Puerto Rico, that process approximately six billion transactions annually. The Company also offers financial technology outsourcing in all the regions it serves. Based in Puerto Rico, the Company operates in 26 Latin American countries and serves a diversified customer base of leading financial institutions, merchants, corporations and government agencies with “mission-critical” technology solutions. For more information, visit www.evertecinc.com.

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 Puerto Rico, including our business with the government of Puerto Rico and its instrumentalities, which are facing severe political and fiscal challenges; additional adverse changes in the general economic conditions in Puerto Rico, whether as a result of the government’s debt crisis or otherwise, including the continued migration of Puerto Ricans to the U.S. mainland, which could negatively affect our customer base, general consumer spending, our cost of operations and our ability to hire and retain qualified employees; operating an international business in Latin America and the Caribbean, in jurisdictions with potential political and economic instability; the impact of foreign exchange rates on operations; our ability to protect our intellectual property rights against infringement and to defend ourselves against claims of infringement brought by third parties; our ability to comply with U.S. federal, state, local and foreign regulatory requirements; evolving industry standards and adverse changes in global economic, political and other conditions; our level of indebtedness and the impact of rising interest rates, restrictions contained in our debt agreements, including the secured credit facilities, as well as debt that could be incurred in the future; our ability to prevent a cybersecurity attack or breach to our information security; the possibility that we could lose our preferential tax rate in Puerto Rico; our inability to integrate Sinqia successfully into the Company or to achieve expected accretion to our earnings per common share; any loss of personnel or customers in connection with the Sinqia Transaction; any possibility of future catastrophic hurricanes, earthquakes and other potential natural disasters affecting our main markets in Latin America and the Caribbean; and the other factors set forth under "Part 1, Item 1A. Risk Factors," in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (the "SEC") on February 29, 2024, as any such factors may be updated from time to time in the Company’s filings with the SEC. The Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless it is required to do so by law.

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?

The new interest rate for EVERTEC's Term Loan B is SOFR + 325 basis points.

When is EVERTEC's Term Loan B due?

EVERTEC's Term Loan B is due in 2030.

By how much did EVERTEC reduce its interest rate margins?

EVERTEC reduced its interest rate margins by 25 basis points.

Does the repricing of EVERTEC's Term Loan B affect its leverage?

No, the repricing is leverage neutral and does not affect EVERTEC's leverage.

Why did EVERTEC reprice its Term Loan B?

EVERTEC repriced its Term Loan B to reduce interest expenses and improve its capital structure and cash flow profile.

EVERTEC, INC.

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