IOUpay accesses debt capital in Malaysia for new product
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In a first for the company, the ASX-listed fintech and digital commerce solutions provider IOUpay’s Asia arm has signed a Letter of Offer from a leading Malaysian NBFI to provide a one-year, RM5.0 million Debt Facility, initiating access to debt capital in its core growth market.
According to Aaron Lee, IOUpay (ASX:IOU) Managing Director, the highly strategic debt facility is a special purpose wholesale finance facility structured to provide 100% funding for batches of bridging loans, the new local market-first product developed under a Strategic Partnership Agreement with investment partner I.Destinasi Sdn Bhd (IDSB).
First revealed back in September, the strategic partnership will help deliver market-leading consumer finance products to Malaysian Federal Civil Servants (FCSs) across various government ministries, with mitigated risk a sweet cherry on the deal.
Preparation is now underway for the rollout of the first product initiative under the agreement to newly hired Malaysian FCSs across education and health sectors, and other key government agencies.
The launch of the strategic partnership highlights the strategic value of IOU’s investment in IDSB.
The debt facility is a special purpose wholesale finance facility structured to fund batches of underlying bridging loans matched in terms of maturity.
IOUpay’s objective is to secure a debt facility with the flexibility for (subject to lender approval) expansion to accommodate future growth.
The value of establishing the debt facility far exceeds the initial IDSB strategic objectives, with Lee indicating the parts are now all in place for increasingly larger scale, lower cost capital to meet IOU’s sustainable and profitable growth objectives across all of its customer portfolios.
“This inaugural debt facility provides the opportunity for the company to build debt servicing credibility in the debt capital markets, facilitating greater access to non-dilutive capital.”
Achieving its first debt facility meets a significant milestone on IOU’s strategic roadmap which was updated and published in a Business Strategy Update in July this year, including a detailed growth plan in phases to achieve scale and profitability.
This morning, Sydney time, in a note to the ASX, IOU has confirmed that a Letter of Offer has been received and accepted for a one-year, RM5.0 million (~A$1.7 million) debt facility.
Lee says whilst the facility limit has initially been set at RM5.0 million, the NBFI has indicated an interest (after an initial trial period and subject to performance) in providing a revolving facility “at a limit sufficient to accommodate expected bridging loan originations.”
The strategic alignment between the NBFI’s lending criteria and IOU’s upcoming roadmap for the rollout of diversified instalment based financial products is clear according to Lee.
“This facility limit will accommodate the first 500 bridging loans originated as a pilot product launch, with a view to an expanded facility following a successful deployment of the terms currently offered.”
The company believes that separately funding these strategic growth initiatives via wholesale debt facilities with lenders who are aligned with IOU in terms of target customers fast-tracks IOU’s sustainable and profitable growth objectives.
Establishing access to lower cost, non-dilutive capital is a major achievement in enterprise development, with Kenneth Kuan, IOUpay’s Group Chief Financial Officer, commenting:
“We are very pleased to have been offered our first debt facility from one of Malaysia’s leading NBFI’s, who have a track record building and supporting businesses for sustainable growth over the longer term.”
“This is a very important phase two milestone on our roadmap as we expand the loan portfolio and establish access to efficient sources of capital to underwrite profitable growth into the future.”
Following acceptance of the Letter of Offer, IOU says it will now work with the NBFI to finalise and agree detailed terms and conditions with the drafting of facility documentation. Further updates for the market are on the way following final agreement and execution of the facility documents.
This article was developed in collaboration with IOUpay, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.