GFNZ has new funding line and to complete repayment to former Geneva debentureholders
GFNZ (formerly Geneva Finance) has finally nailed down the first $3 million tranche of debt funding promised by 20% shareholder, Federal Pacific Group.
Monday, August 27th 2012, 4:40PM
by Jenny Ruth
It is also repaying the remaining $2.5 million owed its investors and bankers by September 30 a month early.
The funding, which involves GFNZ selling $3.3 million of new business receivables will provide funding for the expansion of its profitable new business model," the company says.
This first tranche was to have been in place by June 30 but, like a number of other funding proposals, has been beset with delays. These delays led to Standard & Poor's last week cutting GFNZ's credit rating to "CC" or "currently highly vulnerable" with a negative outlook.
Similar to a securitisation program, GFNZ will no longer own the future cash flow from the receivables sold and will retain a subordinated interest of up to 20% - which means it won't receive anything until FedPac, and any future professional investors in the structure, has been repaid all principal and interest.
"This is an innovative product where getting the first tranche away is the challenge," managing director David O'Connell says. "Once investors see how this investment performs, we expect there will be ready appetite among the professional investor community who will appreciate both the security the structure offers and the high yield of circa 9%."
He says the new structure can offer a better yield than a securitisation as it doesn't have back-up trustees or the infrastructure costs.
Earlier this month, GFNZ repaid half the $5 million it owed its investors and Bank of Scotland under its November 2007 moratorium agreement. It plans to repay the balance on August 31. At the time of the moratorium, GFNZ owed investors $132.4 million. Including the payment announced today, it will have repaid $132.8 million, including $38.9 million in interest at a weighted average interest rate of 10.7%.
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