Moody's assigns Encore notes Ba2

Moody's Investors Service said it assigned a Ba2 backed senior secured debt rating to Encore Capital Group, Inc.'s €100 million tap issuance and affirmed the Ba2 debt ratings on its outstanding backed senior secured notes. Other ratings and the outlook of the group are unaffected by this rating action

The €100 million tap issuance will be fungible with the Ba2 rated €415 million of backed senior secured floating-rate notes due 2028 and its other senior secured debt.

Encore will use the new notes to pay down the revolving credit facility due 2027, which had a credit limit of $1.18 billion and an outstanding amount of $851 million as of June. The incremental issuance and the outstanding backed senior secured notes are subordinated to the revolver and the private placement notes due 2024.

“The increase in the amount of the backed senior secured debt as a result of the new issuance does not result in a material change in expected loss of the existing rated debt, according to the priorities of claims and asset coverage within the proposed liability structure. Furthermore, the issuance will not impact Encore's leverage due to the use of the proceeds to pay down an equivalent amount of the revolving credit facility.

“Moody's expects Encore's debt/EBITDA leverage to remain elevated as portfolio purchases are financed by increased levels of debt. However, as revenues and collections grow, Moody's expects leverage to reduce and remain within the company's maximum leverage guidance of 3x and for interest coverage to improve from current levels,” the agency said in a statement.

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