Encore Capital Group Initiates Redemption of 4.00% Convertible Senior Notes Due 2029 with Enhanced Conversion Incentives

Redemption Notice Sets September 24, 2026 Settlement Date

Encore Capital Group formally issued a Redemption Notice on July 22, 2026, to holders of its 4.00% Convertible Senior Notes due 2029. The Redemption Date is established as September 24, 2026, when any Notes not converted will be repurchased at the Redemption Price, which includes the principal amount plus accrued and unpaid interest up to but excluding the Redemption Date. This provides noteholders nearly two months to decide between converting Notes into common stock or accepting cash repayment.

Noteholders must submit their Notes for conversion by 5:00 p.m. New York City time on the second scheduled trading day prior to the Redemption Date. Encore Capital Group anticipates that most holders will convert their Notes before the deadline, although conversion is not mandatory. Notes not converted by the deadline will be redeemed for cash. Conversions submitted after the call date will be settled in cash rather than stock issuance.

Increased Conversion Rate Encourages Early Conversion

As of July 22, 2026, the standard conversion rate stands at 15.1763 shares of Encore Capital Group common stock per $1,000 principal. However, the company has enhanced the conversion terms by raising the conversion rate to 16.2056 shares per $1,000 principal for conversions made between July 22, 2026, and September 22, 2026. This represents an approximate 6.8% premium, incentivizing noteholders to convert prior to the Redemption Date instead of opting for cash redemption.

This temporary conversion rate increase aligns with common convertible note redemption practices, aiming to encourage voluntary conversions that support efficient capital structure management and reduce potential cash outflows. The enhanced rate applies exclusively during the specified redemption period and expires before the September 24 Redemption Date.

Estimated Cash Outlay Based on July 21, 2026 Stock Price

Encore Capital Group provided a scenario analysis estimating that if all Notes are converted during the redemption period and the stock price remains at the July 21, 2026 closing level, the company would expect to pay approximately $332.5 million in aggregate cash to settle such conversions. This figure reflects the cash consideration payable under the conversion mechanics, which require cash settlement for Notes converted after the redemption call.

It is important to note that this estimate depends on the assumption of stock price stability at the July 21 closing price. Actual cash payments will vary if the stock price fluctuates during the observation period. The filing does not specify the observation period dates or the exact closing price on July 21, 2026. Therefore, the $332.5 million serves as a baseline estimate rather than a definitive forecast.

Capped Call Transactions to Unwind Upon Redemption Completion

When the Notes were issued in February 2023, Encore Capital Group entered into privately negotiated capped call transactions with financial institutions to hedge against dilution from convertible securities. These derivative positions are expected to unwind and terminate fully in connection with the Redemption. Upon unwinding, the company anticipates receiving cash or common stock from counterparties reflecting the current option value of these capped call transactions.

The termination values will be determined based on the market price of Encore Capital Group common stock over a valuation period ending shortly before the Redemption Date. The company plans to finalize bilateral unwind agreements with counterparties, with payments due on or soon after September 24, 2026, subject to possible extensions. This process is standard in convertible debt structures to close hedging positions as Notes are retired or converted.

Potential Market Impact from Hedging Position Unwinding

Option counterparties and their affiliates are expected to engage in hedging activities related to unwinding the capped call transactions. These may include unwinding derivatives tied to Encore Capital Group common stock and potentially selling shares or other securities in secondary markets. Such activity could exert downward pressure on the company's stock price or limit upward price movement.

Investors should be aware that the unwinding of hedging positions by financial institutions can create temporary equity price headwinds. The extent and timing of any impact are uncertain and depend on market conditions, position sizes, and execution strategies. The company’s disclosure serves to inform shareholders of potential volatility during and shortly after the redemption process.

Forward-Looking Statements and Associated Risks

Encore Capital Group’s announcement contains forward-looking statements regarding the Redemption, including expectations about noteholder conversions and the redemption’s effects. These statements are subject to risks, uncertainties, and assumptions about future events that may differ materially from actual outcomes. The company references risk factors detailed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and subsequent SEC filings.

The company disclaims any obligation to update forward-looking statements except as required by law. Investors should consider that actual results may vary significantly from projections contained in the announcement.

Convertible Note Details and Market Context

The 4.00% Convertible Senior Notes due 2029 are fixed-income securities with attached conversion rights. The 4.00% coupon provides annual interest payments based on principal. These Notes remain outstanding obligations on Encore Capital Group’s balance sheet. Redeeming them on September 24, 2026, will remove this debt, either through cash repayment or conversion to equity.

Management’s decision to redeem convertible notes often reflects favorable capital market conditions or strategic capital structure simplification. The current conversion rate of 15.1763 shares per $1,000 principal implies an effective conversion price near $65.90 per share, indicating the stock price level embedded in the conversion formula.

Redemption Timeline for Noteholders and Market Participants

Noteholders have until 5:00 p.m. New York City time on the second scheduled trading day before September 24, 2026, to elect conversion. This deadline likely falls in mid-September 2026, depending on exchange trading days. Notes not converted by then will be repurchased at the Redemption Price on September 24.

The capped call unwind will occur on or shortly after the Redemption Date, with termination values based on stock price observations during a valuation period ending before September 24, 2026. This concentrates derivative unwinding into a brief timeframe. Market participants may observe increased trading volume in Encore Capital Group shares from late July through September 2026 as conversions and hedging adjustments take place.

Impact on Capital Structure and Shareholders

The Redemption will significantly affect Encore Capital Group’s capital structure. If most Notes convert, the company’s share count will rise while debt decreases. If many Notes are redeemed for cash, debt will reduce but cash reserves will decline. Management’s expectation that most holders will convert suggests an equity issuance outcome.

Converting approximately $332.5 million in principal (per the scenario) could cause meaningful dilution. Existing shareholders should consider that the enhanced conversion rate incentivizes conversion, potentially increasing share count substantially. The ultimate effects on earnings per share and voting power depend on final conversion results and future company performance.