PRA Group Announces Pricing of Offering of $400.0 Million of 8.875% Senior Notes due 2030

Rhea-AI Summary

PRA Group announced the pricing of $400 million in 8.875% Senior Notes due 2030, set to close around May 20, 2024. The notes, offered privately to qualified institutional buyers, are aimed to repay $396 million in outstanding borrowings under the North American revolving credit facility. Subsequently, the company plans to use this facility to redeem $298 million of its 7.375% Senior Notes due 2025, along with accrued interest, by September 1, 2024. The notes will be guaranteed by PRA Group's existing and future domestic subsidiaries under the North American Credit Agreement.

Positive

• PRA Group successfully priced $400 million of 8.875% Senior Notes due 2030.
• Notes are high-yielding at 8.875%, which might attract investors.
• Proceeds will repay $396 million of existing borrowings, potentially improving liquidity.
• Subsequent redemption of $298 million 7.375% Senior Notes due 2025 can lower future interest expenses.
• Notes to be guaranteed by existing and future domestic subsidiaries, reducing default risk.

Negative

• High interest rate of 8.875% indicates a higher cost of borrowing.
• Significant reliance on debt refinancing points to potential cash flow issues.
• Notes offered privately, limiting broader market transparency.
• Future obligations under North American Revolver may affect financial flexibility.
• High leverage due to consecutive refinancing may raise concerns among investors.

Insights

Financial Analyst

Financial Perspective: PRA Group's decision to issue $400 million in senior notes with an interest rate of 8.875% instead of using their existing revolving credit facility reflects a strategic maneuver to manage debt maturity and interest costs. The intention to repay the existing $396 million borrowings from their revolving credit facility and subsequently redeem $298 million of 7.375% senior notes due 2025 indicates proactive debt management. This suggests that the company is attempting to optimize its debt profile by spreading out maturities and possibly taking advantage of the current interest rate environment. However, issuing these notes at a higher interest rate of 8.875% compared to the 7.375% notes indicates higher borrowing costs, which could affect net income in the long term. Retail investors should keep an eye on how these changes impact the company's financial health and liquidity while evaluating debt service coverage ratios and interest expense trends.

Market Research Analyst

Market Implications: From a market perspective, this maneuver could have mixed implications. While the restructuring of debt might be seen positively as a move toward financial prudence, the elevated interest rate of 8.875% could signal higher borrowing costs in the future. For retail investors, it is important to assess whether the PRA Group will sustain its market position despite the increased interest expenses. The market might also interpret this issuance as a sign that PRA Group anticipates steady cash flows due to its market position in nonperforming loans, which is critical during economic downturns when such assets often increase. Investors should remain vigilant about future earnings reports to measure the actual impact of these financial activities on the company's profitability.

Legal Expert

Legal and Regulatory Context: The issuance of these senior notes being exempt from the registration requirements of the Securities Act of 1933 highlights that the company is targeting institutional investors rather than retail investors. This method can speed up the process and reduce costs associated with regulatory compliance. However, not registering the notes also means less transparency for retail investors. They should be aware that these financial instruments will be subject to different regulatory scrutiny compared to publicly registered securities. Additionally, the fact that the notes will be guaranteed by the company's domestic subsidiaries could provide an added layer of security to investors, as it links the repayment capability directly to the company's established entities.

NORFOLK, Va., May 15, 2024 /PRNewswire/ -- PRA Group, Inc. (Nasdaq: PRAA) (the "Company"), a global leader in acquiring and collecting nonperforming loans, announced today the pricing on May 15, 2024 of its offering of $400.0 million aggregate principal amount of 8.875% Senior Notes due 2030 (the "notes"), in a private transaction that is exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). The offering of the notes is expected to close on or about May 20, 2024, subject to the satisfaction of customary closing conditions.

The notes will be guaranteed on a senior unsecured basis by each of the Company's existing and future domestic subsidiaries that is a borrower or guarantor under the Company's North American Credit Agreement.

PRA Group intends to use the net proceeds from the offering to repay approximately $396.0 million of its outstanding borrowings under its North American revolving credit facility (the "North American Revolver"). The Company intends to subsequently use borrowings under the North American Revolver on or about September 1, 2024 to redeem its $298.0 million of 7.375% Senior Notes due 2025 (the "2025 senior notes") and to pay accrued and unpaid interest thereon, if any.

The notes were offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to certain persons outside of the United States pursuant to Regulation S under the Securities Act.

This announcement is neither an offer to sell, nor a solicitation of an offer to buy, any of these securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful. Any offer of these securities will be made only by means of a private offering memorandum. The offer and sale of the notes have not been and will not be registered under the Securities Act or any state securities laws, and unless so registered, the notes may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state laws. This announcement does not constitute a notice of redemption of the 2025 senior notes or satisfaction and discharge of the related indenture or an obligation to issue a notice of redemption. Any such notice will be given in accordance with the terms of the indenture governing our 2025 senior notes.

About PRA Group, Inc.
As a global leader in acquiring and collecting nonperforming loans, PRA Group, Inc. returns capital to banks and other creditors to help expand financial services for consumers in the Americas, Europe and Australia. With thousands of employees worldwide, PRA Group, Inc. companies collaborate with customers to help them resolve their debt.

About Forward-Looking Statements
Statements made herein that are not historical in nature, including PRA Group, Inc.'s or its management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

The forward-looking statements in this press release are based upon management's current beliefs, estimates, assumptions and expectations of PRA Group, Inc.'s future operations and financial and economic performance, taking into account currently available information. These statements are not statements of historical fact or guarantees of future performance, and there can be no assurance that anticipated events will transpire or that the Company's expectations will prove to be correct. Forward-looking statements involve risks and uncertainties, some of which are not currently known to PRA Group, Inc. Actual events or results may differ materially from those expressed or implied in any such forward-looking statements as a result of various factors, including risk factors and other risks that are described from time to time in PRA Group, Inc.'s filings with the Securities and Exchange Commission, including PRA Group, Inc.'s annual reports on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K, which are available through PRA Group, Inc.'s website and contain a detailed discussion of PRA Group, Inc.'s business, including risks and uncertainties that may affect future results.

Due to such uncertainties and risks, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of today. Information in this press release may be superseded by more recent information or statements, which may be disclosed in later press releases, subsequent filings with the Securities and Exchange Commission or otherwise. Except as required by law, PRA Group, Inc. assumes no obligation to publicly update or revise its forward-looking statements contained herein to reflect any change in PRA Group, Inc.'s expectations with regard thereto or to reflect any change in events, conditions or circumstances on which any such forward-looking statements are based, in whole or in part.

Investor Contact:
Najim Mostamand, CFA
Vice President, Investor Relations
(757) 431-7913
IR@PRAGroup.com 

News Media Contact:
Elizabeth Kersey
Senior Vice President, Communications and Public Policy
(757) 641-0558
Elizabeth.Kersey@PRAGroup.com 

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SOURCE PRA Group, Inc.

FAQ

What is the interest rate on PRA Group's new Senior Notes?

The new Senior Notes have an interest rate of 8.875%.

When are PRA Group's new Senior Notes due?

The new Senior Notes are due in 2030.

What is the principal amount of PRA Group's new Senior Notes?

The principal amount is $400 million.

How will PRA Group use the proceeds from the new Senior Notes?

The proceeds will repay $396 million of borrowings under the North American revolving credit facility.

When does PRA Group plan to redeem its 7.375% Senior Notes due 2025?

PRA Group plans to redeem these notes on or about September 1, 2024.

What is the purpose of PRA Group's new Senior Notes offering?

The offering aims to refinance existing debt and improve liquidity.

What kind of transaction is PRA Group's Senior Notes offering?

It is a private transaction exempt from the registration requirements of the Securities Act.

Will PRA Group's new Senior Notes be guaranteed?

Yes, they will be guaranteed on a senior unsecured basis by the company's existing and future domestic subsidiaries.