| Tue 29 May 2007, 17:18 | | FPF - Finbond - Abridged prospectus in respect of |
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JSE
FPF
FPF - Finbond - Abridged prospectus in respect of the private placement and
listing of Finbond on the Alternative Exchange of the JSE Limited
Finbond Property Finance Limited
(Previously Quantum Leap Investments 527 (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2001/015761/06)
Share code: FPF ISIN: ZAE000097259
("Finbond" or "the Company")
Abridged prospectus in respect of the private placement and listing of Finbond
on the Alternative Exchange of the JSE Limited
This abridged prospectus is not an invitation to the public to subscribe for
shares in Finbond but is issued in compliance with the Listings Requirements of
the JSE Limited ("the JSE") for information purposes only. The information in
this abridged prospectus has been extracted from the full prospectus to be
issued by Finbond on Wednesday, 30 May 2007 ("the detailed prospectus"), which
is available as set out in paragraph 8. At the date of listing the authorised
share capital of Finbond will comprise 1 000 000 000 ordinary shares with a par
value of 0,0001 cents each of which 229 802 000 ordinary shares will be in
issue and listed.
1. Introduction
Finbond is a South African mortgage originator and financial services
organisation that specialises in the design and delivery of unique value
and solution based mortgage funding options tailored around borrower
requirements rather than institutionalised lending policies. Finbond
conducts its business though 4 divisions focused on:
1. Mortgage Originating;
2. Debt Consolidation and Equity Release;
3. Bridging Finance; and
4. Term Loans
Finbond currently generates between R800 million and R1 000 million of
mortgage advances per month for the major banks and processes between 700
and 1 200 debt consolidation applications per month. Finbond`s annual
origination volumes of in excess of R12 billion make it the fifth largest
mortgage originator in South Africa.
Finbond commenced trading at the beginning of 2003 and has emerged as one
of South Africa`s leading and fastest growing mortgage originators and
providers of unique mortgage related funding and bridging finance
solutions. The catalyst for the growth of Finbond and its subsidiaries
("the Group") has been the identification of the need in the South African
home loan market for innovative lending products and services. The Group`s
management have a long and successful track record within the financial
services sector. This combined with well developed systems, unique branded
product offerings, advanced information technology and a well trained and
motivated staff compliment, provide Finbond with a competitive advantage
for achieving its vision of being the leading non-bank lender and mortgage
originator in South Africa.
2. Nature of business
Finbond is a focussed provider and arranger of mortgage related, debt
consolidation and bridging finance solutions for individuals, predominantly
in the medium to high-income brackets, on a national basis.
Finbond and its subsidiaries specialise in the design and delivery of
unique value and solution based mortgage lending options to clients.
Finbond`s strategy is to offer superior home loan solutions by providing
its customers with better service, better products and better rates.
Finbond markets its product and service offering to potential clients
through advertisements in the national print media and its distribution
network comprised of 25 branches, 75 independent business units, 80
agencies and 475 independent brokers, estate agents and consultants.
Finbond has invested heavily in specialised technology and its workforce
enabling it to provide its clients with a uniquely high level of service.
2.1 Mortgage Originating
The Mortgage Originating division specialises in securing and managing the
entire home loan application process on behalf of clients free of charge.
Whether clients are looking to buy a home, an investment property, a vacant
stand or to obtain a building loan, Finbond is able to offer loan solutions
that meet their different needs. Finbond currently generates between R800
million and R1 000 million worth of mortgage bonds per month for the major
South African banks. For referring mortgages to these banks Finbond
receives a commission and in turn pays out a commission to mortgage
introducers and business units on a sliding scale depending on volumes.
Finbond intends to increase its origination volumes through:
- aggressive national advertising;
- harnessing business units and broker relationships through training
and further by motivating more independent business units and
insurance brokers to actively start participating in the bond
originators market; and
- acquiring selected partnership orientated shareholdings in successful
entrepreneurial owner managed mortgage originating companies, thereby
leading a process of consolidation in a fragmented market.
This division has grown both organically and through the acquisitions of
IBO, Dimension and Bondmaster.
2.2 Debt Consolidation and Equity Release
The Debt Consolidation and Equity Release division is a market leader
in its field and focuses on assisting clients in obtaining access to
finance in order to replace expensive short-term debt with longer-term
mortgage finance (also known as equity release). Many clients of this
division have cash flow problems due to too much expensive short-term
debt (credit card, personal loans, hire purchase, micro loans etc.)
and need to take action to improve their cash flow. The division will
assess a client`s financial situation to determine whether the client
can take out a second or third bond over a fixed property.
Finbond charges a professional fee for these services. The clients
served by this division have typically either already been at their
local bank branch and were unable to obtain a loan or bond by
themselves due to inflexible bank rules, attitudes and poor service or
were unaware that they qualify for a second or third bond in order to
consolidate their short-term debt.
The division currently processes between 700 and 1 200 debt
consolidation applications per month.
In line with international trends, Finbond intends to launch a number
of unique equity release products to the South African market.
2.3 Bridging Finance
Property bridging finance is used to fill the timing gap that arises
in property transactions and enables sellers, existing homeowners and
even buyers to access funds at a far earlier stage than the
conveyancing process typically allows. Generally, sellers only receive
the proceeds from a property sale transaction on registration of the
transfer in the local deeds office. This process usually takes
between 45 and 90 days due to the various legal and regulatory
requirements that need to be completed. Bridging finance allows the
seller to access the proceeds from the property sale at an earlier
stage.
Clients requiring bridging finance can not or do not want to wait four
to six weeks for the bond registration to take place. Finbond will
purchase the clients claim to the proceeds of the sale or the second
bond at a pre agreed price. Finbond does not specify how the funds
are to be used. Money is advanced within 24 hours of signature of the
bond and sale and cession documents at the attorneys and clients are
notified of the payment via e-mail, sms and fax.
Bridging finance is a short-term product, with the average transaction
spanning 30 to 90 days. Finbond`s bridging finance is available
nationally in all South African towns and cities, through a network of
correspondent attorneys and it is a perfect fit with the Debt
Consolidation and Equity Release divisions` products and services.
2.4 Term loans
The Term Loans division of Finbond focuses on assisting clients in the
emerging middle class gain access to finance and credit solutions. The
division operates through 10 branches nationally and a national
network of shop stewards belonging to the National Council of Trade
Unions ("NACTU") which has 450 000 members. Loan Repayments are
deducted via the participating companies` pay roles.
The Term Loan division consists of a network of `banking hall` type
banches where direct contact with clients is possible. These branches
offer financial advice, short-term loans and affordable housing
products to customers. In addition to this, Finbond also approaches
employers and sets up credit facilities for qualifying employees
through wage based deductions. These are primarily employees
affiliated to NACTU trade unions. Trained loan officers also provide
essential education to prospective clients on site.
3. Prospects
As an emerging mortgage originating and finance solutions group, Finbond is
well positioned to take advantage of the opportunities arising from the
liberalisation of the South African Economy, the participation of
historically disadvantaged persons in the formal economy and greater
regional economic development. It is Finbond`s intention to broaden the
scope of its mortgage lending operation by adding further focus on the
provision of specialised products and services in line with trends in
markets such as Australia, Britain and America.
Finbond is currently preparing itself to undergo a period of rapid
expansion in order to gain market share.
Finbond`s key growth drivers are as follows:
- According to SARB statistics, total mortgage advances have grown from
R226 billion in 2002 to R413 billion in 2004, R527 billion in 2005 and
R684 billion in 2006. At present Finbond has a very small share of
the mortgage originating market giving it significant room for growth.
- Industry pressures to formalise the mortgage originating and bridging
finance markets, primarily through licensing and regulation of
operators, will force smaller less sophisticated players out. This
together with high levels of fragmentation in the industry will
precipitate industry consolidation. This will present opportunities
for Finbond to grow its business through strategic acquisitions and
achieve its vision of becoming a national non-bank lender and mortgage
originator of choice.
- Finbond`s know how, independent business units and broker network and
its systems and infrastructure will enable the introduction of new
products and innovative lending solutions. These products will
include additional mortgage loan and bridging products and insurance
related products.
- Finbond`s expertise, experience, enthusiasm, knowledge of the markets
and the businesses in which it operates together with its
understanding of risk also points to substantial future growth.
- The benefits of not only being listed but of being the first and only
listed South African mortgage originator.
The future prospects of Finbond are promising and investors and business
partners will benefit from Finbond`s excellent growth prospects together
with the evolution and development of the mortgage originating and non-bank
lending industries.
4. Financial information
The consolidated pro forma income statement of the Group for the year ended
28 February 2007 and the forecast income statements of the Group for the
years ending 29 February 2008 and 28 February 2009 are set out below.
Pro forma Forecast Forecast
year ended year ending year ending
28 February 29 February 28 February
2007 2008 2009
R`000 R`000 R`000
Revenue 188,006 290,710 342,041
Operating (152,955) (209,245) (223,733)
expenses
Operating 35,051 81,465 118,308
Profit/(Loss)
Finance income 520 1,650 1,800
Finance costs (3,093) (55) (61)
Profit before 32,478 83,060 120,047
taxation
Taxation (9,797) (24,189) (35,182)
Profit 22,681 58,871 84,865
attributable to
ordinary
shareholders
Pro forma
weighted average
shares in issue
on which
earnings per
share are based
229,802,000 214,665,014 291,402,000
Pro forma 27.42 29.12
earnings and 9,87
headline
earnings per
share (cents)
Diluted pro 7,78 21.31 29.12
forma earnings
and headline
earnings per
share (cents)
Main forecast assumptions:
1 General economic trading conditions will not
deteriorate substantially
2 The Group will not experience any material adverse
change in its trading conditions in any of its four
business divisions.
3 The Group will not be adversely affected by any
changes in legislation.
4 That Finbond raises R130 million through the offer for
subscription.
5 The Group does not make any material acquisitions.
6 That Finbond grows its own Bridging Finance Book in
2008 to R50 million and in 2009 to R60 million due to
access to funding and IBO, Bondmaster and Dimension no
longer referring their bridging business to outside
bridging finance companies but to Finbond.
7 Finbond will earn 2% commission on all bond
originating business instead of the 1.6% it earned in
the past on the back of IBO`s contracts.
8 All subsidiaries deliver their warranted profits in
terms of the sale of shares agreements
9 That Finbond earns an average 9.5% interest on all
cash not in the bridging book
10 The relative contribution of each of the divisions to
pre-tax profits for the year ending 29 February 2008
is as follows: Mortgage Originating 29,6%, Debt
Consolidation 7,9%, Bridging Finance 32,5% and Term
Lending 30,0%. The relative contribution of each of
the divisions to pre-tax profits for the year ending
28 February 2009 is as follows: Mortgage Originating
22,5%, Debt Consolidation 7,4%, Bridging Finance 31,5%
and Term Lending 38,6%.
11 The diluted pro forma earnings per share includes a
further 61.6 million shares. These shares will be
issued as a further purchase consideration for the
acquisition of the subsidiaries if the subsidiaries
meet the profit warranties as at 28 February 2008.
5. Directors, company secretary and registered office
Full names, nationalities, ages , business addresses and occupations of the
board of directors of Finbond:
Director Age Function Business address
Dr. Willem 34 Chairman and Momentum Park, 107
(Willie) Chief Nicholson Street,
Van Aardt Executive Brooklyn, Pretoria,
Officer 0181
Mrs. 60 Executive Momentum Park, 107
Hendriena director Nicholson Street,
Johanna Brooklyn, Pretoria,
(Ina) 0181
Wilken
Mr. Danie 59 Financial Momentum Park, 107
Cornelius director Nicholson Street,
Pentz Brooklyn, Pretoria,
0181
Dr. 66 Chariman and 32 Steel Street,
Malesela independent Steeldale, 2197
David non-
Celement executive
Motlatla director
Mrs. 52 Independent EAAB House, Cnr. Jan
Nomonde non- Smuts Avenue and
Tantaswa executive Albury Road,
Mapetla director Johanneburg
Adv. Jasper 67 Independent 14 Olga Road,
Jurgens non- Valhalla, Pretoria
Noeth executive
director
All of the above directors are South African citizens.
The Company`s secretary and registered office are:
Dr. W van Aardt (B.Proc(Cum Laude), LLM, LLD, Attorney of the High Court of
South Africa)
Momentum Park
107 Nicholson Street, Brooklyn
Pretoria, 0181
(PO Box 2127, Brooklyn Square, 0075)
6. Purpose of the private placement and listing
Subject to the achievement of the required spread of public shareholders
and a minimum of 100 shareholders, the JSE has formally approved the
listing of 229 802 000 ordinary shares in the share capital of Finbond on
the Alternative Exchange of the JSE with effect from the commencement of
trade on Thursday, 14 June 2007. The shares will trade under the
abbreviated name "Finbond" with the JSE code "FPF" and the ISIN000097259.
Please note that as at the date of the registration and printing of the
Prospectus, the anticipated listing date was Thursday, 14 June 2007, which
date has subsequently been moved one day later.
Finbond will have capital and reserves of in excess of R137 million on
listing. The Company will have a public shareholding of at least 100
shareholders that will hold a minimum of 10% of the ordinary shares on the
day of listing.
It is intended that an amount of between R130 million and R162,5 million,
before share issue and listing expenses, will be raised by the issue of
shares for cash to private individuals, corporations and institutions and
an amount of between R35 million and R43,75 million, before share issue and
listing expenses, will be raised by the sale of shares for cash to private
individuals, corporations and institutions by the existing shareholder.
Applications made in terms of the private placement will first be allocated
to the subscription offer and only once the full number of shares that are
being offered in terms of the subscription offer have been applied for will
applications be allocated to the sale offer. The proceeds will be utilised
as follows:
R`000
Purchase consideration in respect of 78 000
the strategic acquisitions
To fund growth of bridging and term 48 725
loan lending books
Private placement and listing 3 275
expenses
130 000
To the extent that the proceeds of the offer for subscription exceed R130
million, the funds raised will be used primarily to fund further the growth
of the bridging and term loan lending books.
The purpose of the private placement and the listing are to:
- fund strategic acquisitions and acquisitions aimed at further
entrenching Finbond`s significant distribution network;
- increase the Company`s capital base in order to facilitate the
expansion of its bridging finance and term loan lending books;
- fund the expansion of Finbond`s product range, meet its general
working capital requirements and allow the company to take advantage
of other growth opportunities;
- assist Finbond in attracting and retaining skilled staff through a
meaningful share incentive scheme and to allow key employees the
opportunity to participate in the future growth of Finbond;
- afford public and private investors the opportunity to participate
directly in the equity and future growth of Finbond;
- allow the existing shareholder to realise approximately 11% of its
investment in the Company prior to the private placement thereby also
increasing the Company`s `free float` so as to ensure adequate
liquidity in Finbond shares; and
- enhance Finbond`s public profile.
7. Salient features of the private placement
The salient features of the private placement are as follows:
Offer price per ordinary Between 200 and 250
share (cents)
Par value per ordinary 0.0001
share (cents)
Premium per ordinary share Between 200 and 250
(cents)
Number of ordinary shares
offered in terms of the 82 500 000
private placement
Issue consideration before Between R165 million and
expenses R206,25 million
The opening and closing dates of the private placement are as follows:
Opening date of private Wednesday, 30 May 2007
placement at 09h00 on
Closing date of private Friday, 8 June 2007
placement at 12h00 on
Anticipated listing date on
ALTx at commencement of Friday, 15 June 2007
trade on
The placement will not be underwritten and is subject to a minimum
subscription of R130 million being achieved.
8. Copies of the Prospectus
Copies of this Prospectus, in English, may be obtained during business
hours, from the date of issue of the Prospectus to the closing date of the
private placement, from the registered offices of Finbond, the offices of
Grindrod Bank Limited, 1st Floor, Building 3, Commerce Square, 39 Rivonia
Road, Sandhurst, Sandton or on the Company`s website - www.finbond.co.za.
Pretoria
29 May 2009
Merchant bank
Grindrod Bank Ltd
Designated Adviser
Exchange Sponsors (Pty) Ltd
Joint independent reporting accountants and auditors
PricewaterhouseCoopers Inc
Joint independent reporting accountants
PKF (Pta) Inc
Attorneys
Piet van Zyl
Date: 29/05/2007 17:18:08 Produced by the JSE SENS Department.
