Zacks Analyst Blog Highlights: Dollar Financial, CapitalSource, Global Cash Access Holdings, Sprint Nextel, and Clearwire

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Jan 05, 2011, 02:43 ET

CHICAGO, Jan. 5, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Dollar Financial Corporation (Nasdaq: DLLR), CapitalSource Inc. (NYSE: CSE), Global Cash Access Holdings Inc. (NYSE: GCA), Sprint Nextel (NYSE: S) and Clearwire Corp. (Nasdaq: CLWR).

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Here are highlights from Tuesday's Analyst Blog:

Dollar Financial Expands in U.K.

In an attempt to expand its payday lending business in U.K., Dollar Financial U.K. Ltd., a wholly owned U.K. subsidiary of Dollar Financial Corporation (Nasdaq: DLLR) has agreed to acquire Purpose U.K. Holdings Limited for $195 million.

Purpose is a provider of online payday loans, which operates under the brand PaydayUK in U.K. since 2003.

The deal is expected to complete in the next 90 days, which is subjective to closing conditions and regulatory approval. Further, the acquisition of Purpose would immediately add to the earnings of Dollar Financial, which will be reflected in the earnings outlook of 2010 that the company is expected to provide after the closure of the deal.

Besides U.K., the company has expanded its footprint in Mexico too. Dollar Financial is on track acquiring payday lenders outside the U.S., as the company is trying to curb its exposure to U.S. regulations, which targets at limiting the interest rates. The regulation has capped the interest rates on payday loans to 36% to support the low and middle income families.

Apart from acquiring payday lending businesses, Dollar Financial is vigorously pursuing its pawn lending business growth strategy across product and geography, primarily in highly regulated pawn lending markets such as Sweden and Finland.

Recently in December 31, the U.K. subsidiary of Dollar Financial, Dollar Financial U.K. Ltd., completed the acquisition of a leading pawn lending Scandinavian company, Sefina Finance AB, for approximately $73 million in cash. The Sefina acquisition is expected to be accretive immediately and Dollar Financial expects the deal to be reflective in its earnings outlook for 2011.

In April 2010, Dollar Financial acquired Suttons & Robertsons, the fourth-largest pawn-broking business in the UK, for £15 million with additional potential payments amounting to £2.5 million, over the next two years. Further, in August 2010, Dollar Financial agreed to buy Swedish Internet lending business Folkia Group AS for $28 million.

Overall, Dollar Financial has been tapping on this growing opportunity through mergers and acquisitions and we believe that the acquisition of Purpose will strengthen the position of the company as a leading provider of internet loans across U.K.

Moreover, Dollar Financial is expected to benefit from the solid management team of Purpose, along with its strong business and industry expertise, which will facilitate the expansion of the global internet lending platform, both within the U.K. as well as other countries in Europe and Canada.

Though the company is on a business shopping spree, risks related to its tax strategies, increased debt obligation and its increased international dependence continue to float on the surface. Nevertheless, good liquidity, exposure to a somewhat recession-proof sector and cost containment measures will drive growth in the future. Dollar competes with CapitalSource Inc. (NYSE: CSE) and Global Cash Access Holdings Inc. (NYSE: GCA) in the payday lender industry.

Sprint Rejects Clearwire Debt

Sprint Nextel (NYSE: S), the third-largest U.S. wireless carrier, refused to purchase debt form Clearwire Corp. (Nasdaq: CLWR), which is running a risk of defaulting its loan agreements. Sprint shares rose more than 6% on this news.

On December 2, Clearwire announced plans to raise about $1.2 billion in new debt to finance further expansion of Sprint's wireless broadband network. The deadline was January 2, and Clearwire is still in negotiations for fresh funding with new and existing customers including Sprint and T-Mobile, a unit of Germany's Deutsche Telekom AG. Sprint declined to participate in the debt offered by Clearwire.

Sprint Nextel owns a hefty 54% stake in Clearwire and offers speedy data services to customers via 4G WiMax (a wireless broadband technology) network in collaboration with the latter.

In November, Clearwire raised doubts on its ability to accumulate funds or operate as a "going concern" due to nagging losses, raising worries about Sprint's financial position. After years of struggle, Sprint has narrowed its subscriber losses by using the Clearwire network.The 4G WiMax deployment offers a major prospect in the wireless market that might boost Sprint's revenues.

During the third quarter, Sprint gained approximately 644,000 subscribers, representing 364,000 retail subscribers and 280,000 wholesale and affiliate subscribers in total. This was reportedly the best wireless subscriber growth since 2006.

Sprint's adjusted net loss per share of 18 cents surpassed the Zacks Consensus Estimate by 10 cents. Revenue increased for the first time in three years and was also above the Zacks Consensus Estimate.

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