NEW YORK, May 19, 2014 /PRNewswire-USNewswire/ -- On April 23, 2014, in response to the proposed buyout of DFC Global Corp. ("DFC" or the "Company") by Lone Star Funds ("Lone Star"), Royal Capital Management, LLC ("Royal Capital", "we" or "us") issued a press release (the "Original Press Release") containing a letter sent to the Board of Directors of DFC (the "Board") outlining its intention to vote "AGAINST" all proposals at the upcoming Special Meeting of Stockholders. The letter further highlights Royal Capital's perception of deficiencies in the sale process undertaken by the Board and the resulting woefully inadequate proposed sale price.

Subsequent to our press release, we have spoken to many of the Company's largest stockholders, the vast majority of which are in support of the analysis contained in the Original Press Release. Since the date of the Original Press Release, DFC stockholders have further learned that:

i. In DFC's most recent quarter ended March 31, 2014, the Company generated net cash flows of $56.2 million and now has a total of $236.9 million in cash and cash equivalents, amounting to nearly two-thirds of the total cash consideration to stockholders from the proposed buyout.

ii. Cheque Centre, the second-largest High Street payday lender in the U.K. and DFC's largest store-based lending competitor in the U.K., with 451 stores (compared to DFC's 594), has been forced to exit the U.K. payday loan market under pressure from the FCA for non-compliance.

iii. DFC's largest public internet lending competitor in the U.K, Cash America, faces significant regulatory related expenses on top of existential operational risk under the new FCA regime; justifying the upfront costs which DFC investors have already made in anticipation of the new regulations.

In summary, the U.K. regulatory evolution is playing out exactly as DFC's management stated it would and exactly as, if not more rapidly than, it had previously played out in Canada; all of which benefits DFC. The Board has set the final vote date for June 6, 2014, we believe, in an effort to swiftly finalize the proposed buyout before the true value of the business is revealed in the midst of a rapidly consolidating U.K. consumer lending market.

The Board has not responded to the letter contained in the Original Press Release and Royal Capital continues to search for any rational explanation of how the proposed buyout benefits the Company's current stockholders. We request that the Board address the following questions:

i. Why did the Board approve Lone Star's reduced price offer of $9.50 per share, in comparison to a $12 per share offer made just 24 days earlier, when management's "revised" five-year financial forecast barely changed? The revised "March Forecast" projects a June 30, 2018 Earnings Per Share ("EPS") of $3.99, only 8 cents below the original $4.07 EPS projected in the "February Forecast".([1]) Perhaps more importantly, how does the financial forecast change now that Cheque Centre, DFC's largest store-based lending competitor in the U.K., has been forced to exit the market?

ii. Why does DFC overstate the Company's actual upcoming debt maturities of $156 million by an additional $230 million in the proposed transaction proxy? "In addition to the 2016 Notes, we have outstanding approximately $386 million of debt that either matures, or is redeemable by its holders, within the next 2 1/2 years." However, if the proposed buyout is not approved and there is no change in control, only $156 million of the Company's debt matures, or is redeemable by its holders, within the next 2 1/2 years, of which only $36 million is due before April 2015.([2])

iii. Why does the Company continue to allude to a "need" to refinance their 2016 Notes when this solely represents an opportunistic refinancing in which current stockholders will not participate? "In order to maintain our liquidity and grow our business with our current capital structure, we will need to refinance this debt." Royal Capital questions how a potential interest expense reduction on the 2016 Notes of approximately $12 million per year (estimating a 200 bps savings) is vital to DFC's liquidity. In the context of DFC's $134 million in available credit, $236.9 million in cash and cash equivalents and over $495 million in gross outstanding short term loans([3]), we believe this position to be odd and overstated. Even DFC's own "revised" financial forecast projects a minimum of $178 million in annual EBITDA for FY2015, growing to $350 million by mid-2018, which is more than sufficient to service the Company's current annual obligations of approximately $80 million in cash interest and $20 million in maintenance CapEx. Even if DFC wanted to refinance the 2016 Notes, we believe it could do so given the strength of its cash flows.

iv. In accordance with the Board's fiduciary duty to stockholders, has it considered alternative options that would not force public stockholders to forego the significant upside inherent in the Company's business? Has the Board analyzed the potential stockholder benefit from a spin-off of the internet lending platform or a rights offering? For example, a mere $100 million rights offering would provide additional growth capital to help bridge the gap to a June 30, 2018 EPS of $3.99 and would allow each stockholder to decide the degree to which he or she is willing to mitigate the dilution by participating on a pro-rata basis.

In the best interest of DFC's current stockholder base, our intention is to vote "AGAINST" Proposal #1 (the proposed buyout as it stands today). We also intend to vote "AGAINST" Proposals #2 (the advisory vote regarding change in control payments for members of DFC management) and #3 (the proposal to permit adjournment of the special meeting to solicit proxies if insufficient votes are received to approve the proposed buyout at the special meeting).

Royal Capital encourages all stockholders to review the Original Press Release and is happy to discuss our views with any other stockholders. The Original Press Release (including the letter to the Board) can be accessed at: http://www.prnewswire.com/news-releases/royal-capital-issues-letter-to-dfc-global-corp-board-of-directors-256342841.html

This is not a solicitation of authority to vote your proxy. Please DO NOT send us your proxy card; Royal Capital Management, LLC and its affiliates are not seeking or able to vote your proxies, nor does this communication contemplate such an event. Royal Capital Management, LLC and its affiliates urge stockholders to vote "AGAINST" all proposals at DFC Global Corp.'s upcoming Special Meeting of Stockholders by following the instructions provided on management's proxy mailing.

([1]) EPS calculated on current share count.
([2]) $230 million of DFC's $388 million in convertible debt matures in April of 2017.
([3]) Calculated as sum of gross Retail-based Consumer Loans ($191 million), Internet-based Consumer Loans ($148 million) and Pawn Loans ($156 million) as of 3/31/14.

SOURCE Royal Capital Management, LLC