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Encore Capital Group, Inc. Prices Private Placement Of Convertible Senior Notes

Stocks in this article: ECPG

SAN DIEGO, June 19, 2013 /PRNewswire/ -- Encore Capital Group, Inc. (NASDAQ: ECPG) (the "Company") yesterday priced $150,000,000 aggregate principal amount of 3.00% convertible senior notes due 2020 (the "notes") to be sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act").  The notes will be fully and unconditionally guaranteed on a senior unsecured basis by Midland Credit Management, Inc., a wholly owned subsidiary of the Company.  The size of the offering was increased from the previously announced aggregate principal amount of $110,000,000. In connection with the offering, the Company has granted the initial purchasers an option to purchase up to an additional $22,500,000 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 January 1 and July 1 of each year, beginning on January 1, 2014.  The notes will be convertible, if certain conditions are met, into cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's election.  The conversion rate for the notes will initially be 21.8718 shares per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $45.72 per share of common stock.  The initial conversion price of the notes represents a premium of approximately 30% to the $35.17 per share closing price of the Company's common stock on June 18, 2013.  The sale of the notes is expected to close on June 24, 2013, subject to customary closing conditions. 

In connection with the pricing of the notes, the Company entered into capped call transactions with one or more of the initial purchasers (or their affiliates) and/or one or more other financial institutions (the "option counterparties").  The capped call 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 capped call transactions (which initially corresponds to the initial conversion price of the notes and is subject to certain adjustments under the terms of the capped call transactions), with such reduction and/or offset subject to a cap based on the cap price of the capped call transactions. The cap price of the capped call transactions will initially be $61.5475 per share, which represents a premium of approximately 75% over the last reported sale price of the Company's common stock on June 18, 2013, and is subject to certain adjustments under the terms of the capped call transactions. If the initial purchasers exercise their option to purchase additional notes, the Company expects to enter into additional capped call transactions with the option counterparties.

The Company has been advised by the option counterparties that in connection with establishing their initial hedge of the capped call 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 concurrently with or shortly 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.

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