Cash Converters (CCV) has asked shareholders to pony up to help it pay down debt and improve its balance sheet, launching a $39.5 million entitlement offer on Wednesday morning.
Eligible shareholders will be entitled to one new share for every four currently owned at an issue price of 32 cents, slightly below the 36 cents its stock was at before moving into a trading halt yesterday.
The second-hand and personal financial services provider’s largest shareholder, US pawn giant EzCorp, has signed on for its full entitlement, which will see it acquire just under a third of the 123.3 million new shares expected to be issued for around $12.5 million.
Chief executive Mark Reid said on Wednesday that the new capital would allow the business to build on the growth momentum it demonstrated during the first half of fiscal 18.
“This entitlement offer is important, for growth and improving our balance sheet, reducing our net debt and gearing ratio,” he said.
“The additional capital will allow flexibility to pursue growth opportunities whilst maintaining sufficient working capital.”
The raising is slated to leave CCV with $138.9 million in available funds when combined with almost $100 million in existing cash and equivalents.
It plans to use these funds to pay off a $60 million bond that matures in September, saving it around $4.8 million in annual interest payments.
The remaining $77 million will be used to pursue growth opportunities, signalling that the business may be in the market for acquisitions.
CCV has been exploring international opportunities for some time and could use the new capital to fund an offshore project.
Net debt is expected to fall from $56.8 million to $18.8 million after the raising, while CCV’s gearing ratio is slated to fall from 21 per cent to 6.1 per cent.
In a trading update delivered alongside the announcement on Wednesday CCV reaffirmed guidance that its second half would be stronger than the first, underpinned by “moderate” growth in its loan book.
CCV booked a 35 per cent increase in the value of its loan book to $115.7 million in the first-half, while net bad debt declined to 11.3 per cent and has continued to track “in line with expectations” in the second half.
The offer opens on 5 June and closes on 18 June.
UPDATED 11:26 – AEST
More to come.
