Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of DFC Global (NASDAQ: DLLR), a provider of short-term loans and pawn loans to underbanked people and communities, dropped as much as 14% after withdrawing a $650 million proposed debt offering.
So what: Under normal circumstances, cancelling a debt offering might be viewed in positive light as taking on debt is rarely seen as optimal -- at least in the eyes of shareholders. But this proposed $650 million offering was going to be used to essentially refinance an existing senior loan, which comes due in 2016 and currently boasts an interest rate of 10.375% -- ouch! According to DFC Global, it cancelled the tender offer due to "current market conditions."
Now what: I would normally hint that this seems like a bit of an overreaction to pulling its bond offering, but to be unable or unwilling to refinance existing debt with a rate above 10% in this environment seems worrisome. In addition, DFC's most recent quarterly report (and the report prior to that) points to a weakening business. Its check cashing, money transfers, purchased gold, and overall consumer-lending revenue were down noticeably. The stock is certainly inexpensive on a forward basis, but I believe DFC Global has a lot of kinks it still needs to work through before it gets back on track.
