Conn's, Inc. Announces Pricing of Securitization Transaction
December 13 2017 - 7:30PM
Highest Advance Rate and Lowest Cost of Funds
since Re-entering the ABS Market in 2015
Conn’s, Inc. (NASDAQ:CONN) today announced that it has entered into
an agreement to securitize an aggregate of $669.3 million of
consumer receivables, with closing expected on or about December
20, 2017.
The offering includes three classes of fixed
rate notes: (i) $361.4 million aggregate principal amount of the
Class A asset backed notes are expected to be rated BBB by Fitch
(Fitch Ratings, Inc.) and BBB- by Kroll (Kroll Bond Rating Agency,
Inc.), (ii) $132.2 million aggregate principal amount of the Class
B asset backed notes are expected to be rated BB by Fitch and BB-
by Kroll, and (iii) $78.6 million aggregate principal amount of the
Class C asset backed fixed rate notes are expected to be rated B-
by both Fitch and Kroll.
The face amount of the Class A, Class B, and
Class C notes to be issued in the securitization is approximately
$572.2 million, with an advance rate of 85.5% of the outstanding
customer receivables portfolio balance. Conn’s will receive
upfront proceeds with respect to those notes of approximately
$556.8 million, net of transaction costs and reserves. The coupon
rate to investors is 2.73% on the Class A notes, 4.52% on the Class
B notes and 5.95% on the Class C notes.
The all-in cost of funds of the Class A, Class B
and Class C notes, including transaction costs, is approximately
5.43%, which is a 74 basis point improvement over the 6.17% all-in
cost of funds, including transaction costs, for the Class A, Class
B and Class C notes issued in Conn’s April 2017 securitization
transaction. This transaction reflects the Company’s lowest
all-in cost of funds for a securitization transaction since Conn’s
re-entered the securitization market in 2015 despite a significant
increase in underlying benchmark rates.
With the concurrent issuance of the Class A, B
and C notes in this transaction, the initial advance rate of
approximately 85.5% is the highest advance rate achieved in a
securitization transaction since Conn’s re-entered the
securitization market in 2015. This is also the second
consecutive transaction where Conn’s concurrently issued the Class
A, B and C notes, reflecting strong investor demand.
Despite the impact of Hurricane Harvey, the
Company continues to demonstrate its ability to improve both its
advance rate and all-in cost of funds through strong credit
performance.
The notes will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may
not be offered or sold in the United States absent registration or
an applicable exemption from registration requirements. The notes
will be offered only (i) within the United States to
persons who are qualified institutional buyers as defined in Rule
144A under the Securities Act of 1933, as amended, and (ii) solely
with respect to the Class A Notes, to certain non‑U.S. persons in
offshore transactions in reliance on Regulation S under such
Act.
About Conn's, Inc.
Conn's is a specialty retailer currently
operating over 116 retail locations in Alabama, Arizona, Colorado,
Georgia, Louisiana, Mississippi, Nevada, New Mexico, North
Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia.
The Company's primary product categories include:
- Furniture and mattress, including furniture and related
accessories for the living room, dining room and bedroom, as well
as both traditional and specialty mattresses;
- Home appliance, including refrigerators, freezers, washers,
dryers, dishwashers and ranges;
- Consumer electronics, including LED, OLED, Ultra HD, and
internet-ready televisions, Blu-ray players, home theater and
portable audio equipment; and
- Home office, including computers, printers and
accessories.
Additionally, Conn's offers a variety of
products on a seasonal basis. Unlike many of its competitors,
Conn's provides flexible in-house credit options for its customers
in addition to third-party financing programs and third-party
lease-to-own payment plans.
This press release contains forward-looking
statements within the meaning of the federal securities laws,
including but not limited to, the Private Securities Litigation
Reform Act of 1995 that involve risks and uncertainties. Such
forward-looking statements include information concerning the
Company's future financial performance, business strategy, plans,
goals and objectives. Statements containing the words "anticipate,"
"believe," "could," "estimate," "expect," "intend," "may," "plan,"
"project," "should," or the negative of such terms or other similar
expressions are generally forward-looking in nature and not
historical facts. We can give no assurance that such statements
will prove to be correct, and actual results may differ materially.
A wide variety of potential risks, uncertainties, and other factors
could materially affect the Company's ability to achieve the
results either expressed or implied by the Company's
forward-looking statements including, but not limited to: general
economic conditions impacting the Company's customers or potential
customers; the Company's ability to execute periodic
securitizations of future originated customer loans including the
sale of any remaining residual equity on favorable terms; the
Company's ability to continue existing customer financing programs
or to offer new customer financing programs; changes in the
delinquency status of the Company's credit portfolio; unfavorable
developments in ongoing litigation; increased regulatory oversight;
higher than anticipated net charge-offs in the credit portfolio;
the success of the Company's planned opening of new stores;
technological and market developments and sales trends for the
Company's major product offerings; the Company's ability to protect
against cyber-attacks or data security breaches and to protect the
integrity and security of individually identifiable data of the
Company's customers and employees; the Company's ability to fund
its operations, capital expenditures, debt repayment and expansion
from cash flows from operations, borrowings from the Company's
revolving credit facility, and proceeds from accessing debt or
equity markets; the ability to continue the repurchase program; and
the other risks detailed in the Company's most recent reports filed
with the Securities and Exchange Commission, including but not
limited to, the Company's Annual Report on Form 10-K, the Company's
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. If
one or more of these or other risks or uncertainties materialize
(or the consequences of such a development changes), or should our
underlying assumptions prove incorrect, actual outcomes may vary
materially from those reflected in our forward-looking statements.
You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release. We disclaim any intention or obligation to update
publicly or revise such statements, whether as a result of new
information, future events or otherwise. All forward-looking
statements attributable to us, or to persons acting on our behalf,
are expressly qualified in their entirety by these cautionary
statements. The Company makes available in the investor relations
section of its website at ir.conns.com updated monthly reports to
the holders of its asset-backed notes. This information reflects
the performance of the securitized portfolio only, in contrast to
the financial statements contained herein, which reflect the
performance of all of the Company's outstanding receivables,
including those originated subsequent to those included in the
securitized portfolio. The website and the information contained on
our website are not incorporated in this or any other document
filed with the SEC.
CONN-G
S.M. Berger & CompanyAndrew Berger (216) 464-6400
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