Borrowings

6 Months Ended

Jun. 30, 2025

The Company is in compliance in all material respects with all covenants under its financing arrangements as of June 30, 2025. The components of the Company’s consolidated borrowings were as follows (in thousands):


	June 30, 2025		December 31, 2024
Global senior secured revolving credit facility	$	999,678	$	865,365



Senior secured notes	1,950,022		1,846,047
Convertible senior notes	330,000		330,000

Cabot securitisation senior facility	350,141		319,137
U.S. facility	300,000		283,500
Other	67,710		64,904
Finance lease liabilities	996		1,065
	3,998,547		3,710,018
Less: debt discount and issuance costs, net of amortization	(33,082)		(37,256)
Total	$	3,965,465	$	3,672,762

Encore is the parent of the restricted group for the Global Senior Facility and the Senior Secured Notes, both of which are guaranteed by the same group of material Encore subsidiaries and secured by the same collateral, which represents substantially all of the assets of those subsidiaries.

Global Senior Secured Revolving Credit Facility

In September 2020, the Company entered into a multi-currency senior secured revolving credit facility agreement (as amended and restated, the “Global Senior Facility”). On May 22, 2025, the Company issued an additional commitment increase notice and entered into an amendment letter that amended and supplemented the Global Senior Facility to, among other things, (1) reflect a $190.0 million upsize of the facility from $1,295.0 million to $1,485.0 million, and (2) extend the termination date of the facility from September 2028 to September 2029 except for a $69.5 million tranche that terminates in September 2028. The amendment was accounted for as a debt modification. As of June 30, 2025, the Global Senior Facility included the following key provisions:

•Interest at Term SOFR (or EURIBOR for any loan drawn in Euro or a rate based on SONIA for any loan drawn in British Pound), with a Term SOFR (or EURIBOR or SONIA) floor of 0.00%, plus a margin of 2.25%, plus in the case of Term SOFR borrowings, a credit adjustment spread of 0.10%;

•An unused commitment fee of 0.40% per annum, payable quarterly in arrears;

•A restrictive covenant that limits the LTV Ratio (defined in the Global Senior Facility) to 0.75 in the event that the Global Senior Facility is more than 20% utilized;

•A restrictive covenant that limits the SSRCF LTV Ratio (defined in the Global Senior Facility) to 0.275;

•A restrictive covenant that requires the Company to maintain a Fixed Charge Coverage Ratio (as defined in the Global Senior Facility) of at least 2.0;

•Additional restrictions and covenants which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens; and

•Standard events of default which, upon occurrence, may permit the lenders to terminate the Global Senior Facility and declare all amounts outstanding to be immediately due and payable.

The Global Senior Facility is secured by substantially all of the assets of the Company and the guarantors. Pursuant to the terms of an intercreditor agreement entered into with respect to the relative positions of (1) the Global Senior Facility and any super priority hedging liabilities (collectively, “Super Senior Liabilities”) and (2) the Senior Secured Notes, Super Senior Liabilities that are secured by assets that also secure the Senior Secured Notes will receive priority with respect to any proceeds received upon any enforcement action over any such assets.

As of June 30, 2025, the outstanding borrowings under the Global Senior Facility were $999.7 million. The weighted average interest rate of the Global Senior Facility was 6.49% and 7.85% for the three months ended June 30, 2025 and 2024, respectively, and 6.52% and 7.88% for the six months ended June 30, 2025 and 2024, respectively. Available capacity under the Global Senior Facility, after taking into account applicable debt covenants, was approximately $397.2 million as of June 30, 2025.

Senior Secured Notes

The following table provides a summary of the Company’s senior secured notes (the “Senior Secured Notes”) ($ in thousands):


	June 30, 2025		December 31, 2024		Issue Currency	Maturity Date	Interest Payment Dates	Interest Rate




Encore 2028 Notes	$	343,276	$	312,880	GBP	Jun 1, 2028	Jun 1, Dec 1	4.250	%
Encore 2028 Floating Rate Notes	606,746		533,167		EUR	Jan 15, 2028	Jan 15, Apr 15, Jul 15, Oct 15	EURIBOR +4.250%(1)
Encore 2029 Notes	500,000		500,000		USD	Apr 1, 2029	Apr 1, Oct 1	9.250	%
Encore 2030 Notes	500,000		500,000		USD	May 15, 2030	May 15, Nov 15	8.500	%
	$	1,950,022	$	1,846,047

_______________________

(1)Interest rate is based on three-month EURIBOR (subject to a 0% floor) plus 4.250% per annum, resets quarterly.

The Senior Secured Notes are secured by the same collateral as the Global Senior Facility. The guarantees provided in respect of the Senior Secured Notes are pari passu with the guarantee given in respect of the Global Senior Facility. Subject to the intercreditor agreement described above under the section “Global Senior Secured Revolving Credit Facility,” Super Senior Liabilities that are secured by assets that also secure the Senior Secured Notes will receive priority with respect to any proceeds received upon any enforcement action over any such assets.

The 2028 Floating Rate Notes had a weighted average interest rate of 6.61% and 8.16% for the three months ended June 30, 2025 and 2024, respectively, and 6.85% and 8.18% for the six months ended June 30, 2025 and 2024, respectively.

Convertible Notes

The following table provides a summary of the principal balance, maturity date and interest rate for the Company’s convertible senior notes (the “Convertible Notes”) ($ in thousands):


	June 30, 2025		December 31, 2024		Maturity Date	Interest Payment Dates	Interest Rate


2025 Convertible Notes	$	100,000	$	100,000	Oct 1, 2025	Apr 1, Oct 1	3.250	%
2029 Convertible Notes	230,000		230,000		Mar 15, 2029	Mar 15, Sep 15	4.000	%
	$	330,000	$	330,000

In order to reduce the risk related to the potential dilution and/or the potential cash payments the Company may be required to make in the event that the market price of the Company’s common stock becomes greater than the conversion prices of the Convertible Notes, the Company may enter into hedge programs that increase the effective conversion price for the Convertible Notes. In connection with the issuance of the 2029 Convertible Notes, the Company entered into privately

negotiated capped call transactions that effectively raised the conversion price of the 2029 Convertible Notes from $65.89 to $82.69. These hedging instruments have been determined to be indexed to the Company’s own stock and meet the criteria for equity classification. The Company recorded the cost of the hedge instruments as a reduction in additional paid-in capital, and does not recognize subsequent changes in fair value of these financial instruments in its condensed consolidated financial statements. The Company did not hedge the 2025 Convertible Notes.

Certain key terms related to the convertible features as of June 30, 2025 are listed below ($ in thousands, except conversion price):


	2025 Convertible Notes		2029 Convertible Notes
Initial conversion price	$	40.00	$	65.89
Closing stock price at date of issuance	$	32.00	$	51.68
Closing stock price date	Sep 4, 2019		Feb 28, 2023
Initial conversion rate (shares per $1,000 principal amount)	25.0000		15.1763
Adjusted conversion rate (shares per $1,000 principal amount)(1)	25.1310		15.1763
Adjusted conversion price(1)	$	39.79	$	65.89
Adjusted effective conversion price(2)	$	39.79	$	82.69
Excess of if-converted value compared to principal(3)	$	—	$	—
Conversion date	Jul 1, 2025		Dec 15, 2028

_______________________

(1)Pursuant to the indenture for the Company’s 2025 Convertible Notes, the conversion rate for the 2025 Convertible Notes was adjusted upon the completion of the Company’s tender offer in December 2021.

(2)As discussed above, the Company maintains a hedge program that increases the effective conversion price for the 2029 Convertible Notes to $82.69.

(3)Represents the premium the Company would have to pay assuming the Convertible Notes were converted on June 30, 2025 using a hypothetical share price based on the closing stock price on June 30, 2025.

Prior to the close of business on the business day immediately preceding their respective free conversion dates (listed above), holders may convert their Convertible Notes only under certain circumstances set forth in the applicable indentures. On or after their respective free conversion dates until the close of business on the second scheduled trading day immediately preceding their respective maturity dates, holders may convert their notes at any time.

In the event of conversion, the Convertible Notes are convertible into cash up to the aggregate principal amount of the notes and the excess conversion premium, if any, may be settled in cash or shares of the Company’s common stock at the Company’s election and subject to certain restrictions contained in each of the indentures governing the Convertible Notes.

The Company’s convertible notes are carried as a single liability, which reflects the principal amount of the convertible notes. Interest expense related to the Convertible Notes was $3.1 million for both the three months ended June 30, 2025 and the three months ended June 30, 2024, and $6.2 million for both the six months ended June 30, 2025 and the six months ended June 30, 2024.

In June 2025, in accordance with the indenture for the 2025 Convertible Notes, the Company irrevocably elected “combination settlement” with a specified dollar amount equal to $1,750 per $1,000 principal amount of the 2025 Convertible Notes for all conversions of the 2025 Convertible Notes that occur on or after July 1, 2025, the free conversion date. None of the 2025 Convertible Notes have been converted.

Cabot Securitisation Senior Facility

Cabot Securitisation UK Ltd (“Cabot Securitisation”), an indirect subsidiary of Encore, has a senior facility for a committed amount of £255.0 million (the “Cabot Securitisation Senior Facility”). Funds drawn under the Cabot Securitisation Senior Facility bear interest at a rate per annum equal to SONIA plus a margin of 3.20% plus, for periods after January 18, 2028, a step up margin ranging from zero to 1.00%. The Cabot Securitisation Senior Facility matures in January 2030.

As of June 30, 2025, the outstanding borrowings under the Cabot Securitisation Senior Facility were £255.0 million (approximately $350.1 million based on an exchange rate of $1.00 to £0.73, the exchange rate as of June 30, 2025). The obligations of Cabot Securitisation under the Cabot Securitisation Senior Facility are secured by first ranking security interests over all of Cabot Securitisation’s property, assets and rights (including receivables purchased from Cabot Financial UK from time to time), the book value of which was approximately £295.8 million (approximately $406.2 million based on an exchange rate of $1.00 to £0.73, the exchange rate as of June 30, 2025) as of June 30, 2025. The weighted average interest rate of the

Cabot Securitisation Senior Facility was 7.54% and 8.41% for the three months ended June 30, 2025 and 2024, respectively, and 7.66% and 8.41% for the six months ended June 30, 2025 and 2024, respectively.

Cabot Securitisation is a securitized financing vehicle and is a VIE for consolidation purposes. Refer to “Note 8: Variable Interest Entities” for further details.

U.S. Facility

As of June 30, 2025, an indirect subsidiary of Encore (“U.S. Financing Subsidiary”) had a facility for a committed amount of $300.0 million (as amended, the “U.S. Facility”) that was set to mature in October 2027. Funds drawn under the U.S. Facility bear interest at a rate per annum equal to Term SOFR plus a margin of 3.50%. On July 3, 2025, the U.S. Facility was amended to extend the maturity date from October 2027 to October 2028 and to increase the committed amount from $300.0 million to $450.0 million.

As of June 30, 2025, the outstanding borrowings under the U.S. Facility were $300.0 million. The obligations under the U.S. Facility are secured by first ranking security interests over all of U.S. Financing Subsidiary’s assets and rights. As of June 30, 2025, this included receivables acquired from MCM, the book value of which was approximately $531.6 million. The weighted average interest rate of the U.S. Facility was 7.82% and 8.82% for the three months ended June 30, 2025 and 2024, respectively, and 7.82% and 8.83% for the six months ended June 30, 2025 and 2024, respectively.

The U.S. Facility is a securitized financing vehicle and is a VIE for consolidation purposes. Refer to “Note 8: Variable Interest Entities” for further details.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

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+ Details

ENCORE CAPITAL GROUP INC 10-Q