Rent-A-Center foresees 2x ratio in 2019, net debt below $300 million

By Devika Patel

Knoxville, Tenn., Dec. 20 – Rent-A-Center, Inc. plans to be under 2x levered in 2019, having made “considerable” progress on eliminating debt from its balance sheet and taking its leverage ratio down from 9x at the beginning of this year to its current standing of below 3x.

Management expects net debt to be below $300 million by the end of 2019.

“Given the two strong years of cash flow, we will be under 2x levered and the company will have a much healthier balance sheet [in 2019],” interim chief financial officer Maureen B. Short said on the company’s 2019 financial forecast conference call on Thursday.

The company paid down $139 million of debt this year.

“From a balance sheet and cash flow perspective, we have made considerable progress this year with our leverage dropping from 9x to below 3x by year-end, since we have paid down $139 million in debt and are expecting to more than double our trailing 12-month adjusted EBITDA,” Short said.

“The company recently amended and extended our revolving credit facility through the end 2019 and we expect our net debt to be below $300 million by the end of 2019,” Short said.

On Dec. 12, Rent-A-Center entered into a fifth amendment to its credit agreement dated March 19, 2014 to provide for a $200 million asset-based revolving credit agreement and to extend the revolver scheduled commitment termination date.

Under the amendment, the termination date was extended to the earlier of the consummation of the company’s merger with Vintage Capital Management, LLC and Dec. 31, 2019. On Dec. 18, Rent-A-Center announced the plan of merger under which it was to be acquired by Vintage Capital had been terminated.

The revolver is used for issuance of letters of credit and to manage fluctuations in operational cash flow.

JPMorgan Chase Bank, NA is the administrative agent.

At Dec. 12, Rent-A-Center had no borrowings nor letters of credit outstanding under the credit agreement. It had reserves of $103.2 million against the revolver, leaving $96.8 million of availability.

Rent-A-Center is a rent-to-own operator based in Plano, Texas.

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