Microlender ISP Finance taps the bond market for $570 million | Company
Microlender ISP Finance Services Limited raised $570 million in fresh capital in the bond market to partially fund the expansion of its loan portfolio, as well as to refinance existing debt.
The debt raise, which was arranged by Sterling Asset Management, closed on Wednesday after 15 days on the market. The bond, which is due to mature in 2025, is priced at a fixed rate of 11.50% for the first year, then at a floating rate based on the yield of six-month Treasury bills, plus a spread of 3 .50%.
The six-month Treasury yielded 8.152% in October.
The bond will maintain an 11% floor for interest payments.
The first payment is due on December 31. Thereafter, interest on the bond will be paid quarterly until maturity.
The company did not disclose how much of the proceeds would go to debt refinancing. Its June financial statements show borrowings of $231.4 million related to a corporate bond and a promissory note.
The microlender, which seeks to grow its business in an increasingly competitive microfinance industry, currently manages a loan portfolio of $681 million. The portfolio is static from the previous year, when it was valued at $689 million.
In the June quarter, ISP’s interest income was virtually flat at $113 million, while its net income fell 21% to $15.5 million, making it the third consecutive quarter where ISP saw a decline in profits.
It has been a year since ISP Finance announced plans to acquire portions of a loan portfolio from an entity it did not name. At the time, ISP Finance had only announced that the loan portfolio acquisition agreement reached in 2021, as part of a restructuring of the microfinance sector, gave the company the right to buy certain loans. existing among what was described as a portfolio of medium-sized loans.
This transaction was supposed to materialize by December 2021, but it did not. However, at ISP Finance’s annual general meeting earlier this year, CEO Dennis Smith assured shareholders that the acquisition was still on the table.
ISP Finance started in 2007 as a provider of short-term loans to security guards, then expanded to other workers. The microcredit agency, which operates out of Phoenix Avenue in Kingston, now offers loans primarily for household expenses, small business loans, education, debt consolidation, payday advances and healthcare expenses.
Its target market is largely made up of public sector workers. But its presence in the loan market is far behind that of its big rival Access Financial.
Access in June had a loan portfolio of $4.65 billion, while newly listed competitor Dolla Financial’s portfolio exceeded $1 billion on that date.