Alternative credit provider Cash Converters International (ASX: CCV) is set to raise $50-60 million with the issue of five-year 7.95% per annum unsecured notes (payable semi-annually in arrears). The offer is only available to professional/sophisticated investors. The purpose of the issue is to “diversify current debt funding sources and increase the maturity profile of the overall debt position”.
Cash Converters currently has 717 stores in 21 countries including 118 company-owned stores in Australia and the UK. Operations under the Cash Converters umbrella include the purchase and sale of secondhand goods, franchising stores, cash advances and personal loans, and ‘second car’ vehicle leasing. Westpac provides the bulk of corporate funding.
Business continues to be brisk with 2013 net profit up 11.7%, earnings per share up 4.4% and a dividend of 4c. Average loan in Australia is $341 for 1 month. New regulatory demands (from March 2013) have inhibited activity slightly, however this hurdle appears to have been overcome.
Micro financiers such as Cash Converters provide an essential service and will also gain a competitive advantage as non-compliant rivals move out of the industry.
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Motley Fool contributor Peter Andersen doesn’t own shares in Cash Converters.
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