CPI Card Group Inc. Announces Closing of Private Offering of $285 Million of Senior Secured Notes and Entry into New $75 Million ABL Revolver

Rhea-AI Summary

CPI Card Group (Nasdaq: PMTS) has successfully closed a private offering of $285 million in senior secured notes due 2029, with a 10.000% interest rate. Concurrently, CPI has entered into a new $75 million secured asset-based revolving credit facility (ABL revolver), replacing the previous $75 million facility. The proceeds from the notes, combined with cash on hand, were used to redeem the company's outstanding 8.625% senior secured notes due 2026 and cover related costs. The notes are guaranteed by CPI and its domestic subsidiaries, with the offering available only to qualified institutional buyers and certain non-U.S. persons.

Positive

• Successfully closed $285 million private offering of senior secured notes due 2029.
• Entered into a new $75 million secured asset-based revolving credit facility.
• Proceeds used to redeem higher interest 8.625% notes due 2026, potentially lowering future interest expenses.

Negative

• Issued notes at a high 10.000% interest rate, increasing future interest obligations.

Insights

Financial Analyst

The issuance of $285 million in senior secured notes at a 10.000% interest rate and the concurrent entry into a $75 million secured asset-based revolving credit facility (ABL revolver) are significant moves for CPI Card Group Inc. The primary purpose of these transactions is to refinance the existing 8.625% senior secured notes due 2026. From a financial perspective, CPI is replacing debt with a higher interest rate, which might seem counterintuitive. However, extending the maturity to 2029 provides the company with more breathing room in terms of liquidity and debt servicing. This strategic decision indicates confidence in their future cash flows and business stability. Investors should note the higher interest expense in the short term but consider the long-term stability gained by pushing the debt maturity further out.

Given these factors, stakeholders should weigh the immediate cost increase against the potential for long-term financial stability and flexibility.

Credit Analyst

From a credit perspective, the issuance of these senior secured notes and the secured ABL revolver enhances CPI's liquidity but incurs higher debt costs. The 10.000% interest rate for the new notes is significantly higher than the previous 8.625% rate, which will impact CPI's interest expense. However, the extension of the debt maturity to 2029, combined with the ABL revolver, improves the company’s balance sheet liquidity. The notes are secured by substantially all of the assets of the issuer and the guarantors, offering a higher level of security to creditors and potentially making it easier for CPI to access credit in the future.

Investors should pay attention to CPI's ability to generate sufficient cash flow to cover these higher interest expenses and maintain its liquidity position in the coming years.

LITTLETON, Colo.--(BUSINESS WIRE)-- CPI Card Group Inc. (Nasdaq: PMTS) (“CPI” or the “Company”) today announced the closing of the previously announced private offering by its wholly-owned subsidiary, CPI CG Inc. (the “issuer”), of $285 million aggregate principal amount of its 10.000% senior secured notes due 2029 (the “notes”) and related guarantees. Concurrently with the issuance of the notes, the Company entered into a $75 million secured asset based revolving credit facility (the “ABL revolver”), which replaced its existing $75 million facility.

The issuer used the net proceeds from the notes offering, together with cash on hand, to redeem all of the issuer’s outstanding 8.625% senior secured notes due 2026 (the “2026 notes”) and to pay related fees, premiums and expenses.

The notes are general senior secured obligations of the issuer and guaranteed by the Company and all of its current and future wholly-owned domestic subsidiaries (other than the issuer) that guarantee the ABL revolver, and are secured by substantially all of the assets of the issuer and the guarantors, subject to customary exceptions.

The notes and related guarantees were offered only to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), or outside the United States to certain non-U.S. persons in compliance with Regulation S under the Securities Act. The issuance and sale of the notes and related guarantees have not been, and will not be, registered under the Securities Act or the securities laws of any state or other jurisdiction, and the notes and related guarantees may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and other applicable securities laws.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the notes and related guarantees. Offers of the notes and related guarantees were made only by means of a private offering memorandum, and are not being made to any person in any jurisdiction in which such offer, sale or solicitation is unlawful.

About CPI Card Group Inc.

CPI Card Group is a payments technology company providing a comprehensive range of credit, debit, and prepaid card and digital solutions, including Software-as-a-Service (SaaS) instant issuance. With a focus on building personal relationships and earning trust, we help our customers navigate the constantly evolving world of payments, while delivering innovative solutions that spark connections and support their brands. We serve clients across industry, size, and scale through our team of experienced, dedicated employees and our network of high-security production and card services facilities—located in the United States.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240711374372/en/

CPI Card Group Inc. Investor Relations:

(877) 369-9016

InvestorRelations@cpicardgroup.com

CPI Card Group Inc. Media Relations:

Media@cpicardgroup.com

Source: CPI Card Group

FAQ

What did CPI Card Group announce about a private offering?

CPI Card Group announced the closing of a $285 million private offering of senior secured notes due 2029.

What is the interest rate on CPI Card Group's new senior secured notes?

The interest rate on the new senior secured notes is 10.000%.

What will CPI Card Group use the proceeds of the $285 million notes offering for?

The proceeds will be used to redeem the company's outstanding 8.625% senior secured notes due 2026 and to pay related fees, premiums, and expenses.

What is the new revolving credit facility CPI Card Group entered?

CPI Card Group entered into a new $75 million secured asset-based revolving credit facility.

When are the new senior secured notes issued by CPI Card Group due?

The new senior secured notes are due in 2029.