Aggregator sells $125m of loan book

A listed mortgage aggregation group has announced the sale of $125 million worth of loan assets managed by its non-core business.

In a trading update on Friday, eChoice Limited said it is pleased to announce that in line with its dedicated growth strategy it has signed an agreement with Columbus Capital Pty Limited for the sale of the company’s $125 million of loan assets, managed by its non-core Firstfolio Capital business.

Transaction proceeds from the sale comprise approximately $2 million, before costs, and will release approximately $6 million of cash collateral. Funds from the sale will be used to pay down the senior debt obligation of the company. With the resultant lower interest expense, the transaction is expected to be EPS positive for eChoice from 2017.

“The business is now acutely focused on its core competencies and its growing strengths and this sale allows us to effectively re-position ourselves to more comprehensively capitalise on the unique opportunities ahead,” eChoice CEO Peter Andronicos said.

“Specifically, we will be utilising our resources and specialist in-house capabilities to continue expanding eChoice’s broker and online businesses,” Mr Andronicos said.

“This will allow us to take further advantage of the rapidly developing trend of digital distribution and marketing of mortgages and other financial products. Having taken the first formative steps based on our strategy, we are already seeing early figures reflecting clear evidence of growth,” he added.

“The transaction represents a well-considered and timely opportunity for the company to optimise its returns to shareholders and lower its gearing by realising the inherent value of the Firstfolio Capital loan book.”

The principal operations of Firstfolio Capital were acquired by the company in late 2011, with the acquisition of the Calibre business, a specialist residential mortgage funder, securitiser and loan servicer.

However, over the past few years, Firstfolio Capital’s contribution to group earnings has not sufficiently met expectations and was restraining projected growth, according to today’s trading update.

The aggregator recorded a statutory net loss after tax of $21.1 million for the 2015 financial year. CEO Peter Andronicos said the financial results should be seen in the context of setting the business on a new growth path and the significant investment associated with this.

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