As many analysts and investors predicted, the float of US-controlled Latitude Financial is not going well – so much so that the offer price and the size of the offering have been cut only five days before its planned listing this Friday.
And with a two bookbuild starting today and ending tomorrow afternoon, there is every chance the price could fall further if buyer demand is weak, or the offer could be withdrawn for the second time in two years.
Media reports yesterday say that Latitude’s owner, buyout group, KKR and its advisors have cut the suggested price by 11% because of weak interest in the shares. That cut is on top of an earlier reduction in the suggested offer prices which is now $1.78.
That compares badly with the price range of $2 and $2.25 a share in the initial prospectus lodged with ASIC in September.
The float will now seek to raise about $1 billion in exchange for up to 33% of the company when it lists on Friday, down from the previously planned 35%.
The cut in the price and the size of the offer is supposed to make big investors more eager to buy into the float.
It is the second attempt to list Latitude by KKR, Deutsche Bank and Varde Partners after an attempt in 2018 failed. When that deal died the suggested market value was $5 billion., so somehow, $1.9 billion in value has vanished in the space of a year or so, despite the AX being almost 14% higher than a year ago.
The trio had filed a prospectus with the regulator last month valuing the finance company at between $2 and $2.25 per share.
The firm, which offers easy-access loans and credit cards with minimal paperwork, expects to report 3% in cash earnings of about $288 million for the 12 months ending June 2020, according to its prospectus.
KKR, Deutsche Bank and Varde Partners paid $8.2 billion for the company in 2015 when it was GE Capital’s Australian and New Zealand consumer lending arm.
Today, it has about $8 billion in gross loans to two million customers, primarily credit cards, personal loans, and auto loans, and it plans to grow its digital and installment payment business, according to the prospectus says. It also has a high level of loan losses and write-offs.
