Encore Capital Group, an international specialty finance company, initiated a process to combine the two balance sheets of Midland Credit Management and Cabot Credit Management into a unified funding structure. Previously, Midland served as Encore’s primary operating unit in the U.S. and Cabot served as the primary operating unit in the UK. In this new configuration, Encore would become the parent of a restricted group consisting of all subsidiaries of Encore against which all covenant performance would be measured.

To implement the new structure, Encore entered into an amended multi-currency revolving credit facility that supports the operations of both Midland and Cabot, with an increased total commitment of $1.05 billion, an extension of maturity to 2024 and with Encore and all its material subsidiaries as guarantors, According to an 8K filed with the SEC, Truist Bank is serving as agent and security agent for the facility. In addition to the revolver, Encore entered into a new stretch facility with a committed amount of up to $300 million and an amendment to the terms of the existing Cabot senior secured notes to, among other things, add Encore and its material subsidiaries as guarantors and have Encore become the parent of the restricted group.

The effectiveness of the new financing transactions is dependent upon satisfaction of certain conditions, including receipt of consents from at least a majority of the holders of Cabot’s £513 million ($691 million) 7.5% senior secured notes due 2023 and €400 million ($538.79 million) senior secured floating rate notes due 2024, pursuant to a consent solicitation commenced on Sept. 1.

Assuming the conditions to the effectiveness of the new financing transactions are satisfied, Encore intends to repay and terminate its current domestic revolving credit facility and term loan facility and repay a portion of its outstanding senior secured notes.

Through the new financing transactions and the consent solicitation, Encore is seeking to achieve a unified financing strategy to combine Cabot’s balance sheet with that of the wider Encore group, which the company believes will fully leverage the combined size of Encore and Cabot, maximize financial flexibility by utilizing a global borrowing base, enhance access to capital markets and result in a strengthened credit profile for both existing and prospective Encore group lenders and investors.

Upon completion of the new financing transactions, Encore expects to record related charges in Q3/20 totaling approximately $18 million after tax.

Encore Capital Group is an international specialty finance company that provides debt recovery solutions and other related services across a range of financial assets.