Debt-plagued lender Firstfolio is being salvaged by its director and shareholder Tony Wales, who has lent it $29 million to repay its debt to Commonwealth Bank.
Non-bank lender Firstfolio has had trouble repaying its loan over the past two years to Commonwealth, which has already extended the payback period twice while alternative finance was found.
Firstfolio announced on the ASX on Friday that Tony Wales, through his private company Welas, has stepped in to bail Firstfolio out by fully repaying the Commonwealth loan.
Welas currently provides $29.3 million of subordinated loans to Firstfolio. The terms and maturity of the outstanding loan will be aligned with the new loan, making Welas the senior debt provider and secured creditor.
“This refinancing will address Firstfolio’s immediate funding needs and allows us to confidently pursue opportunities with our business partners and broker network, and implement a debt reduction program over time without the pressure of our existing debt facilities reaching maturity in the near term,” Firstfolio chairman Eric Dodd said.
The Welas loan has a two-year term and an interest margin of 450 basis points over the bank bill swap rate. Firstfolio will pay an establishment fee of $450,000.
If Firstfolio undertakes a future capital raising, the first $10 million raised can be used as additional working capital to fund growth, with any further amounts applied to reduce gearing, a company spokesperson said.
Firstfolio reported a heavy loss of $300,000 for the six months to December, compared with a net profit of $1.8 million in the previous corresponding period.
Revenue was down 3% to $37.5 million and the value of the loan book fell by 2% to $18.5 billion.
The company took another blow in January, after IZN Investments Ace Management – the company which agreed to invest a minimum of $39.5m of equity capital in Firstfolio – missed the 20 January deadline and was unable to confirm when the funds would be transferred.
Firstfolio is now pursuing an "informal process" of investigating alternative funding arrangements while it implements a debt-reduction programme, the spokesperson said.
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