Microlender ISP Finance taps bond market for $570m
Microlender ISP Finance Services Limited has raised $570 million in fresh capital on the bond market to part-fund the expansion of its loan portfolio, as well as refinance existing debt.
The debt raise, which was arranged by Sterling Asset Management, closed on Wednesday after 15 days on the market. The bond, which is set to mature in 2025, is priced at a fixed rate of 11.50 per cent for the first year and then a variable rate based on the six-month Treasury bill yield, plus a spread of 3.50 per cent.
The six-month Treasury yielded 8.152 per cent in October.
The bond will maintain a floor of 11 per cent for interest payments.
The first payment is due on December 31. Thereafter, interest on the bond will be paid quarterly to maturity.
The company did not disclose how much of the proceeds would go towards debt refinancing. Its June financials indicate borrowings of $231.4 million linked to a corporate bond and promissory note.
The microlender, which is looking to grow its business in an increasingly competitive microfinancing sector, currently manages a loan portfolio of $681 million. The portfolio is static relative to the previous year, when it was valued at $689 million.
In the June quarter, ISP’s interest income was basically flat at $113 million, while its bottom line shrank by 21 per cent to $15.5 million, making it the third consecutive quarter that ISP has seen a decline in earnings.
It’s been a year since ISP Finance announced plans to acquire portions of a loan portfolio from an entity it did not name. At the time, ISP Finance only announced that the loan book acquisition deal struck in 2021, amid a restructuring in the microfinance sector, gave the company the right to purchase select existing loans from what was described as a medium-sized loan portfolio.
That transaction was expected to have materialised by December 2021, but didn’t. However, at ISP Finance’s annual general meeting earlier this year, CEO Dennis Smith assured shareholders that the acquisition was still on the cards.
ISP Finance started in 2007 as a provider of short-term loans to security guards, then expanded to include other workers. The microlending agency, which operates from Phoenix Avenue in Kingston, now offers loans largely for household expenditure, small business loans, education, debt consolidation, payday advances and healthcare expenses.
Its target market is largely made up of public-sector workers. But its foothold in the lending market tracks far behind that of big rival Access Financial.
Access, in June, had a loan portfolio of $4.65 billion, while newly listed competitor Dolla Financial’s portfolio was above $1 billion at that date.