PRA Group outlook revised to negative at S&P on high leverage
Investing.com | Editor Luke Juricic
Published Jun 11, 2025 03:28PM ET
Investing.com -- S&P Global Ratings revised its outlook on debt purchaser PRA Group Inc. to negative from stable on Wednesday while affirming the company's 'BB' credit ratings.
The rating agency cited PRA Group's elevated leverage ratio, with S&P Global Ratings-adjusted debt to EBITDA remaining above 5.0x at year-end 2024 and through the first quarter of 2025.
PRA Group has increased its purchase volume since 2024, taking advantage of strong supply and favorable pricing in the distressed debt market. The company acquired approximately $1.4 billion of nonperforming loans (NPLs) in 2024, marking the highest annual purchase volume in its history.
This aggressive acquisition strategy came amid elevated credit card levels and charge-offs in the U.S. and Europe, creating a favorable environment with robust supply and attractive pricing multiples exceeding 1.95x. Several large competitors also retreated from portfolio investments during this period.
Despite cost management efforts, PRA maintained an S&P Global Ratings-adjusted debt to EBITDA ratio of about 5.4x last year. This elevated leverage follows a net loss in 2023 driven by a decline in expected recoveries.
In the first quarter of 2023, PRA revised its expected recoveries due to underperformance of one of its core North American vintages, which caused leverage to increase to 5.4x from 4.1x in 2022.
S&P expects PRA to focus on cost management and cash collections in 2025. The rating agency projects the company will operate with leverage above 5.0x in 2025 before progressively deleveraging from 2026 as cash collections improve, particularly from the legal channel.
The rating agency noted that it could lower PRA's ratings if adjusted debt to EBITDA remains sustained above 5.0x, either due to lower-than-expected cash collections or continued aggressive portfolio acquisitions at the expense of deleveraging.
S&P could revise the outlook back to stable if PRA operates with leverage consistently below 5.0x while maintaining sufficient liquidity to meet its short-term obligations.
Despite the negative outlook, S&P acknowledged PRA's leading market position, geographical diversification, adequate liquidity profile, and absence of near-term refinancing risk.
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