(Bloomberg) -- Goeasy Ltd., a non-prime Canadian lender of consumer loans, plans to increase a credit facility for loan originations in a step before a potential first-time sale of asset-backed securities, Chief Executive Officer Jason Mullins said.
The Mississauga, Ontario-based company, which also leases household furnishings, appliances and electronics, inked a C$200 million ($162.4 million) revolving securitization warehouse facility with National Bank of Canada in December. Goeasy also plans to invite other banks to join the transaction via a syndication process, Mullins said.
“That would be our next step in terms of our capital structure,” Mullins said in a phone interview. After that, “probably some time late this year or more likely next year” -- once the company accumulates history with the warehouse -- it will consider going to the public ABS market, he said.
Goeasy would join the likes of Canadian non-prime lender Fairstone Financial Inc., which sold its inaugural ABS transaction in 2019. Also that year, Home Capital Group Inc. priced the first deal pooling non-prime Canadian home loans since 2007, according to DBRS data.
Goeasy is looking at securitization after selling $320 million of five-year high-yield bonds last month to help finance the purchase of point-of sale provider LendCare. The bonds were priced to yield 4.375%, which was equivalent to an interest rate of 4.818% after the company swapped into Canadian dollars. As a reference, the weighted average interest rate of its consumer loans portfolio is 34.4%, assuming the acquisition of LendCare was completed, Goeasy said last month.
While the firm doesn’t need to return to the bond market this year, it will evaluate the “economics” of refinancing its $550 million of 2024 bonds whose first call option is late this year, said Mullins.
Its existing pool of loans “has performed very well,” as consumers reduced their expenses during the pandemic, said Mullins. Still, “demand for borrowing has softened during this period,” he said. Goeasy is scheduled to release its quarterly earnings on May 11.
“We’re very optimistic about the growth of our business going forward,” said Mullins. “We do expect that during the next couple of months as the lockdowns subside and people are able to go out and start spending again” that demand for consumer financing will increase.
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