PRA Group, Inc. (NASDAQ:PRAA) recently announced the pricing of $300 million, 3.50% convertible senior notes due 2023 in a private placement to qualified institutional buyers.
The unsecured, senior notes would pay interest at a rate of 3.50% semiannually per annum. The notes are slated to mature on Jun 1, 2023, unless repurchased, redeemed or converted in accordance with their terms prior to such date.
The conversion rate for the notes will remain at 21.6275 shares per $1,000 principal amount of notes initially, and subject to adjustments in certain cases. The initial conversion price represents a premium of approximately 35.0% to the $34.25 per share closing price of PRA Group’s common stock on May 22, 2017.
Upon conversion, the notes are most likely to be settled in cash, shares of PRA Group’s common stock or combination of the two. The notes will be redeemable, at the company’s option at any time on or after Jun 1, 2021 at a price equal to the principal amount of the notes to be redeemed, added with the accrued and unpaid interest. This choice of redemption will apply only if the last reported sale price per share of PRA Group’s common stock exceeds 130% of the conversion price on each of at least 20 trading days.
The company’s estimates say that the net proceeds from this offering of notes will be approximately $291.6 million. If the initial purchasers optimally exercise their option to purchase additional notes, the amount can reach approximately $335.4 million, after deducting discounts, commissions and estimated offering expenses.
The company plans to use nearly $45.0 million of the net proceeds to repurchase shares. It also intends to use roughly $246.6 million of the net proceeds to repay debt outstanding under its North American revolving credit facility, from which it has been borrowing frequently. In addition, PRA Group also plans to use the borrowings under its revolving credit facility for portfolio and business acquisitions, plus general corporate purposes.
The company has always been enhancing shareholders’ values through share repurchases and dividend payments. Hence, despite its heavy debt burden, the stock gained 27% over last one year, outperforming the Zacks categorized Financial Miscellaneous Services industry’s increase of 11.6%.
Zacks Rank and Stocks to Consider
PRA Group presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the finance sector are Cigna Corporation (NYSE:CI), James River Group Holdings, Ltd. (JRVR) and Torchmark Corporation (NYSE:TMK). All stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cigna’s earnings beat estimates in three of the last four quarters with an average earnings surprise of 1.35%.
Another multi line insurer, James River Group, delivered positive earnings surprises in all last four quarters with an average positive surprise of 9.47%.
Torchmark surpassed expectations in all last four quarters with an average beat of 2.01%.
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PRA Group, Inc. (PRAA): Free Stock Analysis Report
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