To replace the credit facility in U.S. and Canada, Dollar Financial Corp (DLLR) plans to go for a four-year global revolving credit facility of $200 million. The company might further expand the credit facility to $250 million.
Dollar Financial’s new facility replaces the existing revolving credit facility in U.S. of $75.0 million and C$28.5 million facility in Canada; and is expected to mature on March 3, 2015.
Apart from this, Dollar Financial’s credit facility may be utilized to initially fund a portion of the company’s pending acquisition of Purpose U.K. Holdings Limited for $195.0 million, which was announced in January, 2011.
Further, the interest payable on borrowings under the new credit facility will be derived from a pricing grid based on the total leverage ratio of Dollar Financial. In addition, it was planned that borrowings will be done at an interest rate of LIBOR plus 400 bps, or approximately 4.25%.
Dollar Financial’s revolving credit facility will facilitate deployment of funds globally in an efficient manner by allowing multiple tranches of multi-currency borrowings. Besides this, Dollar Financial will be able to continue its business expansion and diversification strategy.
Likewise in December, CNO Financial Group, Inc. (CNO) had borrowed $375 million under the senior secured credit facility.
We believe that Dollar Financial is vigorously pursuing its global acquisition strategy. In addition, this facility is expected to provide short term liquidity needs in the normal course of business, providing additional capacity and enhanced flexibility for pursuing these opportunities.
Besides U.K., the company has expanded its footprint in Mexico too. Dollar Financial is on track to acquire payday lenders outside the U.S., as the company is trying to curb its exposure to U.S. regulations, which targets limiting the interest rates. The regulation has capped the interest rates on payday loans to 36% to support the low and middle income families.
Apart from acquiring payday lending businesses, Dollar Financial is vigorously pursuing its pawn lending business growth strategy across products and geography, primarily in highly regulated pawn lending markets such as Sweden and Finland.
Though the company is on a business shopping spree, risks related to its tax strategies, increased debt obligation and its increased international dependence continue to be concerns. Nevertheless, good liquidity, exposure to a somewhat recession-proof sector and cost containment measures will drive growth in the future.
CNO FINL GRP (CNO): Free Stock Analysis Report
DOLLAR FINL CP (DLLR): Free Stock Analysis Report
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