DFC Global to Offer Notes - Analyst Blog
April 10 2012 - 2:40PM
Zacks
In a private offering, DFC Global Corp. (DLLR)
announced its intentions to issue $200 million in senior
convertible notes due 2017.
With interest that is payable semi-annually, the notes will be
unsecured, senior obligations of DFC Global. The company also
expects to offer purchases of an additional $30 million aggregate
principal amount of notes to the initial purchaser.
Concurrent to the offering, in order to lower the expected
dilution upon future conversion of the notes, DCF Global intends to
enter into convertible note hedge transactions with one or more
associates of the initial purchasers of the notes (“option
counterparties”).
Furthermore, the company intends to enter into separate warrant
transactions with option counterparties at a higher strike price.
However, this warrant transaction can also have a dilutive impact
if market price exceeds the strike price.
Moreover, if the initial purchasers opt for purchasing the
additional notes, DFC Global will enter into additional convertible
note hedge and warrant transactions with the option
counterparties.
The company intends to deploy the net proceed, in part, to
finance convertible note hedge transactions costs and the remaining
for general corporate purposes and debt repayments. The other
general corporate purposes encompass acquisitions, investments and
share buybacks.
Following the issuance of the notes, the company’s debt balance
will increase as will its debt to capital ratio. The company ended
the fiscal second quarter with debt balance of $768 million, down
0.9% from fiscal 2011 end level. Debt capital ratio was 63.5% at
the end of fiscal second quarter compared with 64.5% at fiscal 2011
end. With the debt issuances, the debt capital ratio will increase
by 520 basis points. There will be an increase in the company’s
interest burden as well.
We retain our Neutral recommendation on DFC Global over long
term. The quantitative Zacks #3 Rank (short-term Hold rating) for
the company indicates no clear directional pressure on the stock
over the near term.
Headquartered in Berwyn, Pennsylvania, DFC Global provides a
range of consumer financial products and services to under-banked
consumers.
DFC GLOBAL CORP (DLLR): Free Stock Analysis Report
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