Credit Corp Successfully Completes Share Purchase Plan | KOSEC

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Credit Corp Successfully Completes Share Purchase Plan

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Local debt collection company, Credit Corp Limited (ASX: CCP), has today announced the completion of its share purchase plan. Specifically, the overwhelming response from shareholders increased the size of the share purchase plan to $35 million, beyond the initial target of $30 million. These shares are due to be issued and traded on the ASX on 10 June 2020.

Close to 3 million new fully paid ordinary shares are expected to be issued to shareholders at $12.50 a security. This was the same price for the issue price under Credit Corp’s Institutional Placement, where 9.6 million new shares were issued. The completion of the share purchase plan, as well as the $120 million Placement, will collectively bring the total funds raised to that of $155 million of equity. More broadly speaking, CEO Thomas Beregi regards the capital raised to be reflective of Credit Corp’s strong balance sheet position. The funds will also provide the firm with more room to capitalise on promising growth opportunities when they surface.

Like many firms, Credit Corp began the year with a strong balance sheet sufficient to weather the COVID-19 pandemic. Yet, the raising was necessary to allow the firm to emerge out of the pandemic stronger without having to compromise on any of its businesses for a significant period. Before the pandemic, CCP’s segments were performing well, with the US leading the gains. Specifically, for the nine months to March 2020, debt buying collections in Australia & New Zealand were 9 per cent higher than that of the previous corresponding period. Yet, collections in the US climbed 57 per cent over the prior corresponding period.

In such unprecedented times, it is inevitable for many to be experiencing financial stress. Within Australia, the government’s $130 billion JobKeeper Scheme has thrown a lifeline to many who have lost their jobs overnight. Yet, when the scheme ends in September, there will be a medium-term impact on credit-impaired individuals. Thus, Credit Corp has implemented a series of additional measures aimed to enhance its lending approach. These include the temporary interest freeze on debt purchase accounts, the rolling out of repayment moratoriums and the temporary suspension of credit reporting. Aside to these, Credit Corp has regularly sent out text messages to encourage online rescheduling of repayment plans. The success of this initiative was witnessed in the two-fold increase in online activity.

Within the firm, Credit Corp has also actively adopted cost-reduction measures. Temporary reductions comprise a reduction of directors’ fees of 50 per cent, slashing of short-term incentives and discretionary expenditure will assist in bringing costs down by $2 million per month. Along with the recent capital raising, Credit Corp’s financial position remains strong. This is because gearing is will be reduced to approximately 10 per cent of the carrying value of assets and banking facilities amounting to $375 million will mature only in 2022 and 2023.

By Caroline Wong 

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Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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