Tapping the simple corporate bond market

Finance company Axsesstoday has turned to the little-used simple corporate bond market to raise $55 million of funds.

It is only the fourth company to launch a simple corporate bond, which is a simplified prospectus and disclosure regime that facilitates retail trading in the bonds on the Australian Securities Exchange.

Axsesstoday’s bonds will pay a floating rate, set at a margin of 490 basis points over the three-month bank bill rate (currently around 2.1 per cent), with a term of five years. Interest payments will be made quarterly. Axsesstoday does not have a credit rating.

The company, which commenced operations in 2012, is a specialist provider of finance for small to medium businesses, with the majority of its lending to hospitality and transport businesses. At the end of the December half-year the company’s receivables were valued at $256 million.

Its products are leases, equipment finance (chattel mortgages) and short-term business loans. The receivables book is diversified, with more than 50 per cent of leases originated at less than $50,000. The company has more than 8,000 customers.

Axsesstoday reported net profit of $3.2 million for the six months to December – a 95 per cent increase over the previous corresponding period. It receivables grew by 190 per cent over the previous corresponding period.

It expects to report a net profit of $7 million for the full year – an increase of 96 per cent over the 2016/17 results.

Its arrears rate (receivables overdue 30 days or more) was 1.6 per cent of gross receivables during the December half.

In May the company established a $200 million securitisation warehouse facility to fund its lending.

It says funds raised from the bond issue will support loan book growth and the repayment of existing borrowings.

Axsesstoday chief executive Peter Ferizis says: “The bonds enhance Axsesstoday’s funding structure and are expected to reduce its overall funding costs, while lengthening the maturity profile of corporate debt.”

The bond is an unsubordinated and unsecured debt obligation. The bond offer includes a couple of covenants, including maximum debt to receivables ratio of 85 per cent and interest cover to not less than two times.

The simple corporate bond regime was introduced in 2013. The law reform package included a simplified disclosure regime and changes to directors’ civil liability provisions in respect to bonds issued to retail investors, as well as provision for the bonds to be issued on the ASX.

Simple corporate bonds were introduced as a way of opening up a retail corporate bond market and providing greater liquidity for issuers.

Evans Dixon Corporate is the arranger and joint lead manager of the Axsesstoday bond issue. A corporate adviser at the firm, Scott Favoloro, says despite the poor record of simple corporate bond issuance, “they have a place”.

Favoloro says: “There are several reasons they have not taken off. They are not familiar to issuers, cheap debt has been easy to get from other sources and there are easier ways of transacting.

“The appeal is that they give a broader market access to corporate debt. We have done three out of the four issues so far and will continue to promote them.”