SAN DIEGO, Nov. 21, 2012 /PRNewswire/ -- Encore Capital Group, Inc. (NASDAQ: ECPG) (the "Company") yesterday priced $100,000,000 aggregate principal amount of 3.00% convertible senior notes due 2017 (the "notes") to be sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. In connection with the offering, the Company has granted the initial purchasers an option to purchase up to an additional $15,000,000 aggregate principal amount of such notes to cover sales in excess thereof.
The notes will be senior unsecured obligations of the Company. The notes will bear interest at a rate of 3.00% per year payable semiannually in arrears on May 27 and November 27 of each year, beginning on May 27, 2013. The notes will be convertible, if certain conditions are met, into cash and, in certain circumstances, shares of the Company's common stock, based on a volume-weighted average price of the common stock on each day of an observation period. The conversion rate for the notes will initially be 31.6832 shares per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $31.56 per share of common stock. The initial conversion price of the notes represents a premium of approximately 25% to the $25.25 per share closing price of the Company's common stock on November 20, 2012. The sale of the notes is expected to close on November 27, 2012, subject to customary closing conditions.
In connection with the pricing of the notes, the Company entered into convertible note hedge transactions with certain financial institutions (the "option counterparties"). The convertible note hedge transactions are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount upon conversion of the notes in the event that the market price of the Company's common stock is greater than the strike price of the convertible note hedge transactions. The Company also entered into warrant transactions with the option counterparties. The warrant transactions could separately have a dilutive effect if the market price of the Company's common stock exceeds the strike price of the warrant transactions, unless the Company elects, subject to certain conditions, to settle the warrant transactions in cash. The strike price of the warrant transactions will initially be $44.1875 per share, which represents a premium of approximately 75% over the last reported sale price of the Company's common stock on November 20, 2012, and is subject to certain adjustments under the terms of the warrant transactions. If the initial purchasers exercise their option to purchase additional notes, the Company expects to enter into additional convertible note hedge transactions and additional warrant transactions with the option counterparties.
The Company has been advised by the option counterparties that in connection with establishing their initial hedge of the convertible note hedge transactions and warrant transactions, the option counterparties or their respective affiliates expect to enter into various derivative transactions with respect to the Company's common stock and/or purchase shares of the Company's common stock in privately negotiated transactions and/or open market transactions after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of the Company's common stock or the notes at that time. In addition, any repurchases by the Company of its common stock from purchasers of the notes could affect the market price of the common stock after the pricing of the notes.
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