This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Rent-A-Center, Hoping to Pay Dividend, Will Refinance

NEW YORK (The Deal) -- Rent-A-Center (RCII - Get Report) announced Thursday it intends to refinance its senior credit facility with $850 million in new debt, as the largest rent-to-own business in North America tries to boost its financial position and get the go-ahead to pay a shareholder dividend amid concerns over its performance, liquidity, and debt covenant compliance.

The Plano, Texas-based company, which allows customers to lease products such as electronics, appliances, furniture and accessories under rental purchase agreements with no long-term obligation, hopes to replace its existing $687.5 million credit facility with a $350 million term loan and a $500 million revolving credit facility.

Rent-A-Center said it wants to arrange the new financing by the end of this year's first quarter. The company said it plans to repay the $348 million outstanding under its existing senior credit facility with proceeds from a new term loan.

The current senior secured credit facility, which matures on July 14, 2016, has two parts: a $500 million revolver with $212.5 million drawn as of Sept. 30, and a $250 million term loan. The interest rate on that facility is either prime rate plus 0.5% to 1.5%, or Eurodollar rate plus 1.5% to 2.5%.

Must Read: Helen of Troy Attracts Suitors Amid Activist Pressure

Moody's Investors Service expressed concerns about Rent-A-Center's liquidity in a Feb. 4 report that issued a downgrade to Ba3 from Ba2, and the new debt financing plan would provide more flexibility.

"They are increasing their debt slightly to provide more liquidity," Moody's analyst Michael Zuccaro said Thursday by phone.

He warned that, due to poor financial performance, a mere $42 million in cash on the balance sheet, and an expected cash outflow of up to $100 million in 2014, "they'll be highly reliant on their revolver, and on top of that, their covenant cushion has deteriorated significantly."

Another motivation for the refinancing effort is to make it possible for Rent-A-Center to pay a shareholder dividend during the second quarter.

"Given non-compliance with its incurrence covenants, the company is restricted from paying dividends at this point because of its leverage," Zuccaro explained.

The company's Thursday statement said that it "anticipates obtaining from its existing lenders a waiver under its existing credit agreement to permit the declaration and payment of a dividend for the second quarter of 2014, subject to approval by the Company's board of directors."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
RCII $25.20 0.00%
AAPL $112.12 0.00%
FB $93.24 0.00%
GOOG $643.61 0.00%
TSLA $220.69 0.00%


Chart of I:DJI
DOW 17,084.49 +33.74 0.20%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,830.47 +19.6820 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs