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Analyst Blog

Standard & Poor's Ratings Services (S&P) allotted “B+” issuer credit rating (ICR) to DFC Global with a stable outlook.

Concurrently, the credit rating agency also allotted “B+” rating to the company’s expected $200 million notes issue.

DCF Global has also priced its proposed $200 million notes offering. The notes will carry a coupon of 3.25% with maturity scheduled for 2017.

The rating on DFC Global incorporates the company’s solid market position along with its widespread exposure and different product offerings. The rating also takes into account DFC Global’s increased leverage, negative tangible equity and modest interest coverage.

The rating agency stated that DFC Global will be considered for rating upgrades if the company maintains or lowers the leverage at below 3.5x and maintains or increases EBITDA interest coverage at above 4.0x. Also, the rating agency expects the company to maintain sufficient liquidity.

However, the rating will be subject to downgrade if profitability lowers and leverage trends or surpasses 5.0x.

DFC Global reported a strong fiscal second quarter with earnings of 51 cents, ahead of the Zacks consensus Estimate as well as year ago earnings led by a solid performance at its core business units.

The company experienced higher consumer lending revenue (shooting 61% year over year) and pawn service fees and sales increased nearly three fold. The company also has a solid liquidity position, besides remaining focused on enhancing its shareholders value.

Going forward, the company is also expected to grab opportunities through acquisitions and deploy the available funds to further enhance future earnings.

We retain our Neutral recommendation on DFC Global over the 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.

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