Just four days after Standard & Poor's (S&P) downgraded its credit rating on GFNZ Group, which trades as Geneva Finance, to CC citing "heightened concerns" the company could default, the car lender says it has raised NZ$3 million of fresh funds.
GFNZ said it had placed NZ$3.3 million of new business receivables into a Prime Asset Trust Limited funding scheme, using this security to raise NZ$3 million of new debt funding from its cornerstone investor, Federal Pacific Group Limited.
"This placement will assist Geneva in maintaining its track record of early repaying its scheduled debt repayment programme and provide funding for the expansion of its profitable new business model," Geneva managing director David O’Connell said in a statement.
Last Thursday S&P said the downgrade - from CCC- to CC with a negative outlook - reflected "heightened concerns" GFNZ could default in the next few months if it was unsuccessful in securing new additional external funding, with the possibility of default extending through to March 2013 if receipt of money from planned funding initiatives is delayed. On August 14 GFNZ said a four-for-one rights issue, worth NZ$1.4 million, had been deferred to at least October.
O'Connell said the Prime Asset Trust scheme had been developed in response to a difficult funding market and offers a "highly secure" and high cashflow investment opportunity. It's only available to professional and habitual investors. O'Connell said the financing structure of the Prime Asset Trust scheme was "completely" independent of Geneva meaning whatever Geneva does in the future, the receivables and their cashflows are exclusively for the benefit of Prime Asset Trust investors.
Geneva retains a subordinated position of up to 20% in the receivables but gets no cash from the investment until all investors’ principal and interest is repaid in full.
“This is an innovative product for which getting the first tranche away is the challenge. Once investors see how the investment performs, we expect to see a ready appetite within the professional investor community, where both the security offered by the structure and the high yield of circa 9% will be appreciated," O'Connell said.
Meanwhile, Geneva will repay another NZ$2.5 million of debentures this Friday, four weeks ahead of schedule and O'Connell said the company would "revisit" the timing of its shelved rights issue with an announcement likely in early October.