November 22, 2013 / 5:39 PM / 4 years ago

DFC Global pulls high-yield deal after lawsuit

NEW YORK/LONDON, Nov 22 (IFR) - The high-yield market ended on a down note on Friday after pawn broker DFC Global pulled a USD650m-equivalent bond offering.

The company blamed market conditions, even though deals have been flying off the shelf this week with more than USD6bn-worth of deals pricing in the US market alone - and some observers said it was more to do with a lawsuit filed on Thursday.

“It’s an absolute joke that they cited market conditions given how buoyant the market is,” said one syndicate banker.

An investor said: “It didn’t sound as if it was going very well, and this just added fuel to the fire.”

The lawsuit, filed by Brower Piven on behalf of some purchasers of DFC Global common stock, alleges violations of securities laws regarding disclosures in an SEC filing.

DFC Global shares were down more than 11% at mid-session on Friday.

Although lawsuits like this are fairly common in the US, they are less frequent in Europe - and the announcement may have unnerved investors in the region.

A second banker said the leads may have been too optimistic about how well the deal would sell in Canada, which is still a relatively small high-yield market.

Credit Suisse, lead left on the eight-year non-call three Canadian dollar tranche, and Deutsche Bank, lead left on the seven-year non-call three sterling tranche, were not immediately available to comment.

Price talk of 9.25% area on the Canadian dollar piece and 8.75%-9% on the sterling was announced on Thursday around the same time that the lawsuit was filed.

Three bankers said the deal could be revived. If it is, the issue will more likely be denominated in US dollars and sterling, ditching the Canadian tranche altogether.

The company had decided to tap the Canadian and UK debt capital markets as a diversification play, as well as being in line with its global presence.

Around 50% of the company’s sales come in the UK and Ireland, with around 30% in Canada, 11% in the US and the rest in Europe.

It has a network of approximately 600 stores in the UK and Republic of Ireland, nearly all of which operate under the Money Shop brand. The company also offers unsecured Internet-based loans to UK consumers under the brand names PaydayUK and Payday Express.

The bond was intended to refinance an existing USD600m 10.375% maturing in 2016 that becomes callable in December.

The tender offer for that bond has also been canceled.

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