PRA lifts liquidity with leverage-neutral notes sale, revolver refi

By Devika Patel

Knoxville, Tenn., Feb. 28 – PRA Group Inc. has been busy shoring up liquidity this quarter and last.

The company extended the maturity of a European revolving credit facility last quarter and sold $400 million of notes in January in a leverage-neutral sale, the proceeds of which are earmarked to retire $345 million of 3˝% convertibles due 2023 and reduce borrowings under PRA’s revolver.

“During the quarter, we completed the renegotiation of our European credit facility, which simplified covenants, reduced borrowing costs and extended the maturity to 2027,” executive vice president and chief financial officer Pete Graham said on the company’s fourth quarter and year ended Dec. 31, 2022 earnings conference call on Monday.

“Earlier this month, we completed a $400 million offering of senior unsecured notes.

“Due to the robust demand for the notes, we were able to upsize the offering to $400 million with pricing at the low end of our anticipated range; $345 million of the net proceeds from this offering will be used to retire our convertible notes maturing in June, with the remainder used to pay down our revolving credit lines,” he said.

“Although we will see a slight uptick in our leverage metrics in the first quarter, this offer is leverage neutral and improves our maturity profile.

“Our funding position is strong, and we have ample capacity in all the markets where we invest,” Graham said.

PRA generated $1.1 billion of adjusted EBITDA for the year.

Total revenues were $223 million for the quarter and nearly $1 billion for the full year.

Cash and cash equivalents were $83,376,000 as of Dec. 31, 2022, compared to $87,584,000 as of Dec. 31, 2021.

At the end of the quarter, PRA had $1.6 billion available under its credit facilities, $465 million of which was available to borrow after considering borrowing base restrictions.

Borrowings were $2,494,858,000 as of Dec. 31, 2022, compared to $2,608,714,000 as of Dec. 31, 2021.

Debt to adjusted EBITDA was 2.25x as of Dec. 31, 2022.

On Nov. 23, 2022, subsidiary PRA Group Europe Holding Sarl refinanced its $750 million European revolving credit facility with a new €730 million revolver.

The new revolver, maturing Nov. 23, 2027, features an uncommitted accordion feature for up to €500 million, subject to a borrowing base and certain conditions.

It is secured by a first perfected security interest in all of the equity interests in certain operating subsidiaries of the borrowers, certain intercompany loans and certain shareholder loans extended by the parent company to the borrowers.

Borrowings will be available in euros, Norwegian krone, Danish krone, Swedish krona and Polish zloty and bear interest at the appropriate benchmark rate for the currency plus an applicable margin based on the ERC ratio.

The revolver is subject to financial covenants that require the company maintain a consolidated total leverage ratio not to exceed 3.5x, a consolidated senior secured leverage ratio not to exceed 2.25x and a positive consolidated income from operations. In each case, the covenant applies at the end of any fiscal quarter.

Facility proceeds may be used to refinance certain debt, to finance approved loan portfolios and for other general corporate purposes.

At closing, the full balance of outstanding principal and interest of the refinanced facility was transferred to the new revolver. The previous facility was terminated after the transfer.

DNB Bank ASA was both facility agent and security agent.

On Jan. 23, the company priced an upsized $400 million issue of five-year senior notes (Ba2//BB+) at par to yield 8 3/8%.

The issue size increased from $350 million.

The yield printed at the tight end of yield talk in the 8˝% area. Initial guidance was in the high-8% area.

BofA Securities Inc. and Truist Securities Inc. were the lead bookrunners. Joint bookrunners were Capital One Securities Inc., Citizens Capital Markets Inc., DNB Markets Inc., Fifth Third Securities Inc., ING Financial Markets LLC and MUFG Securities Americas Inc.

The Norfolk, Va.-based debt collector earmarked the proceeds to redeem, repurchase, repay and/or tender for all or any of its $345 million outstanding 3˝% convertible senior notes due 2023. The incremental proceeds resulting from the $50 million upsizing of the deal were earmarked to repay debt under the revolving credit facility.

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