Dollar Financial Corp. (DLLR) recently announced that its indirect wholly owned Canadian subsidiary, National Money Mart Company, plans to issue $350 million of senior notes in a private offering.
 
National Money Mart will offer the senior notes to qualified institutional buyers and the offering is expected to be completed by this month.
 
Dollar Financial intends to use a portion of the net proceeds from the notes offering to finance the previously announced acquisition by its wholly owned subsidiary, Dollar Financial Group, Inc., of Military Financial Services, LLC. The company also plans to prepay $100 million of its existing term loans pursuant to a proposed modification of its existing credit agreement. The remainder of the proceeds from the notes will be utilized for general corporate purposes including funding for additional growth opportunities.
 
Dollar Financial’s results for the last few quarters suffered from falling consumer lending volumes and revenues from all other sources as a result of a difficult economic environment and a tightening of the company’s lending standards.
 
We remain concerned about the risks related to its tax strategies, extremely fragmented nature of business and international dependence. However, a solid liquidity position, exposure to a somewhat recession-proof sector and cost containment measures will drive future growth. Thus, we are maintaining our Neutral recommendation on the shares.
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