Zip raises $150m corporate loans at 15pc

Zip also said it had made an offer to CVI investments to convert $40 million of convertible notes into 21.7 million shares, in addition to a $29.4 million cash incentive payment. CVI is an affiliate of Susquehanna International Group, which provided the capital to finance the acquisition of QuadPay in 2020.

The company said it still had $85 million of senior convertible bonds outstanding as $25.1 million of the securities had been converted to shares.

Zip has been focusing on “liability management” to rid its balance sheet of expensive financing, in particular convertible debt that is costly to refinance but also highly dilutive if converted to shares given it was raised when the share price was materially higher than it is at present.

While the Ares loan and the convertible notes provide financing to the operating company, Zip finances most of its lending via separate receivable funding facilities.

Zip also said it had refinanced a $US225 million US receivables funding facility with US private debt fund Victory Park for a three year term. In November, it raised $300 million from the local securitisation market.

Zip said the new financing arrangements would have a “modest positive net impact” on the company’s cash position, while the corporate interest expense as a result of the changes would be immaterial.

The company, which appointed Cynthia Scott as its new chief executive office in August, said it still expected to achieve a positive group cash earnings before tax depreciation and amortisation for the second half of 2024.

The update was anticipated by research analysts such as Citi’s Siraj Ahmed that pointed out the need for the company to renew its corporate facility ahead of its March 2024 expiry date.

Mr Ahmed told clients that Zip’s trading updates had demonstrated “an acceleration in US revenue growth while keeping loss-rates low” adding there was “an upside risk to consensus”.

Citi upgraded its 2024 cash EBTDA forecast from $6 million, which was below consensus forecasts of $5 million, to $17 million.

Zip shares fell 3.2 per cent on Monday to 61¢, but that followed a strong week after hints the Federal Reserve may cut interest rates in 2024 spurred a 23 per cent gain.

Shares in Zip are up 23 per cent so far this year, but are 85 per cent below the $4.18 price in December 2021. Zip shares peaked at over $12 in February of that year.