Rent-A-Center Inc. (RCII) has priced a new $250 million senior unsecured notes offering, which is expected to commence on May 2, 2013. The debt offering has been priced at an interest rate of 4.75% per annum, with maturity due in 2021.
The notes under the private offering will be issued to qualified institution investors and non-U.S. investors who are exempted from registration under the Securities Act of 1933.
The funds raised from the offering are expected to be used for repayment of the company’s loans under its revolving credit facility worth $46 million. The remainder of the proceeds will be directed toward enhancing shareholder value by buying back shares and for general development of its business.
Rent-A-Center has a consistent track record of returning cash to its shareholders in the form of share repurchase and dividend payment. Earlier this week, the company enhanced its current share repurchase authorization to $1.25 billion from $1 billion.
Since the inception of the share buyback program, the company has repurchased 31,585,314 shares for approximately $794.8 million. Moreover, it bought back 465,035 shares for approximately $17.4 million during the last reported quarter.
Additionally, the company has been paying regular quarterly dividends to its shareholders over the past few years. Since the inception of its dividend program, the company has raised its dividend rate from the initial 6 cents per share to the current 21 cents per share, the last upside being announced in Dec 2012. This brings the company’s annual dividend rate to 84 cents per share, with the payout ratio currently standing at 2.44%.
Rent-A-Center offers consumer electronics, appliances and furniture products under rental purchase schemes that allow customers to own the merchandise upon completion of the rental period. Due to continued tightening of the credit market, customers see rent-to-own as a more flexible and viable option compared to credit. However, the sluggish recovery and a fragile job market may make customers reluctant to enter new rental-purchase deals.
Currently, Rent-A-Center holds a Zacks Rank #4 (Sell). Other stocks worth considering in the finance-leasing industry are AeroCentury Corp. (ACY) , KCAP Financial Inc. (KCAP) and American Capital Ltd. (ACAS), all holding a Zacks Rank #1 (Strong Buy).
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