SquareTwo settles exchange offer early, implements recapitalization plan

By Marisa Wong

Morgantown, W.Va., May 25 – SquareTwo Financial Corp. announced on Wednesday the early settlement of its exchange offer, under which it issued new term loans and preferred stock, and the implementation of its comprehensive recapitalization plan.

The exchange offer closed on Tuesday after the company accepted for purchase $224,811,000 of its 11 5/8% senior second-lien notes due 2017, according to a press release.

At the early settlement, SquareTwo also entered into a supplemental indenture removing some covenants and events of default from the indenture governing the second-lien notes. The company had solicited consents to remove those covenants and events of default.

As of the expiration of the offer at 11:59 p.m. ET on May 24, holders had tendered $267,755,000, or 92.33%, of the outstanding notes.

Holders who tendered their notes for exchange will receive, for each $1,000 principal amount, $650 principal amount of new term loans due 2019, including $30 principal amount relating to the delivery of consents by the consent payment expiration deadline on May 13, and $350 initial liquidation preference of a new series of preferred stock.

The company previously extended the consent payment deadline from May 12 and, before that, from May 10.

The company said it anticipates that it will accept for purchase all notes that were not exchanged at the early settlement, subject to the participating holders providing specific information to Cortland Capital Markets Services LLC on or before the final settlement date. Cortland Capital is the administrative agent for the new term loans due 2019.

The company will separately announce the expected final settlement date.

The offer, which began on April 28, is conditioned on tenders for at least 70% of the outstanding notes. This condition has been satisfied.

The exchange and information agent is D.F. King & Co., Inc. (866 406-2287, 212 269-5550 or squaretwo@dfking.com).

Recapitalization

Holders of more than 75% of the 11 5/8% notes had entered into an agreement for a proposed recapitalization of the company, which includes participation in the exchange offer, according to a prior announcement.

SquareTwo announced on Wednesday that, as part of the recapitalization, it also obtained a new $165 million credit facility consisting of a $105 million term loan and a $60 million revolver.

In addition, the company entered into a new $30 million credit facility underwritten by some holders of the 11 5/8% notes, of which $15 million was funded upon the early settlement of the exchange offer and the remaining $15 million will be available to fund future portfolio acquisitions, subject to some conditions.

“SquareTwo is well positioned with its proprietary operating model in the United States and Canada to continue performing as a leader in the distressed asset purchase and management industry. This recapitalization positions us for intelligent growth,” SquareTwo president and chief executive officer Paul A. Larkins said in the press release.

“We have continued to make significant investments in our operating and compliance platforms, primarily through advanced analytics and technology, which position us for long-term success.”

SquareTwo’s legal adviser in connection with the recapitalization is Hogan Lovells US LLP, and its investment banker is Evercore.

SquareTwo is a Denver-based asset recovery and management company.

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