Recently, Portfolio Recovery Associates Inc. (PRAA - Analyst Report) announced a private placement of convertible senior notes due 2020 worth $250 million. In case of over-allotment, the initial purchasers will likely be given the right to purchase an additional $37.5 million worth of senior notes.
Portfolio Recovery’s offer is subject to market conditions and is open only to qualified institutional buyers as defined by the Rule 144A under the Securities Act of 1933, as amended.
The senior notes will be unsecured and the final terms of the offer, including interest and conversion rates, will be decided on the basis of discussions between Portfolio Recovery and the initial purchasers. The interest on the notes will be payable semi-annually.
While the notes cannot be redeemed before maturity, Portfolio Recovery can convert them into equity shares, cash or a combination of the two, any time from Feb 1, 2020 till maturity. Before Feb 1, 2020, the conversion will be eligible only under special circumstances.
Portfolio Recovery plans to use about $190 million from the net proceeds for repayment of debt outstanding under its revolving credit facility. Additionally, the company intends to buy back equity shares of up to $50 million via negotiated transactions with institutional investors. Portfolio Recovery plans to conduct these transactions through one of the initial purchasers or its affiliate.
Portfolio Recovery will use any residual amount of the net proceeds, along with the amount available under the revolving credit facility for acquisition of portfolios and businesses as well as for general corporate purposes, such as organic growth, working capital and capital expenditure, share buybacks and dividend payment.
Portfolio Recovery currently carries a Zacks Rank #1 (Strong Buy). Other business services outsourcing companies worth considering are Barrett Business Services Inc. (BBSI - Snapshot Report), Cap Gemini S.A. and R.R. Donnelley & Sons Company . All these companies carry a Zacks Rank #1 (Strong Buy).