National Australia Bank will provide ASX-listed zipMoney with a $200 million funding line, part of a $260 million facility that represents the largest debt market deal to date for an Australian fintech.
ZipMoney shares surged on Wednesday after it announced a two-year asset-backed securitisation warehouse for its consumer receivables would begin operating this week, and reduce its average cost of funding to around 5 per cent if fully drawn. It had previously said its average funding cost was 12 per cent.
The company said the deal "will have a material positive impact" on its future profitability and help drive towards its break-even guidance for the 2018 financial year.
ZipMoney is a point-of-sale credit provider that offers customers a "buy now, pay later" proposition with an interest-free period, creating an alternative to using a credit card. Founded in June 2013, it floated in September 2015 at 20¢ a share.
The stock surged 10 per cent to 68¢ on the back of the announcement on Wednesday but shares are still 27 per cent below their post-float high of 94¢ hit last October.
The facility also includes $40 million of mezzanine funding via a two-year bond that has been issued to wholesale investors through FIIG Securities, and $20 million in junior notes and equity.
The deal could be a precursor to a future asset-backed securitisation deal into the capital markets.
ZipMoney said it would immediately refinance $70 million of existing receivables that have been funded by a separate facility with Victory Park Capital that is set to expire. Victory Park Capital remains an equity investor.
The company told a Goldman Sachs conference on April 27 it had a strong March quarter with revenue of $4.6 million on transaction volume of $61 million and its loan book was $114.7 million. It has originated more than $200 million on the platform via 500,000 users who have shopped at more than 3000 retailers.
ZipMoney CEO Larry Diamond said the new facility "provides significant headroom for our rapidly growing origination volumes and an immediate bottom line benefit".
NAB's funding was provided after a detailed due diligence process including the core technology platform and underwriting processes. NAB's executive general manager of capital financing Steve Lambert said the facility "underscores NAB's commitment to fintech innovation in Australia and our belief in zipMoney's business model".
Last year, zipMoney bought the free budget management app targeting millennials, Pocketbook,which has 350,000 users and is set to benefit from reforms announced in the federal budget relating to open data.
In a paper released on Tuesday, the Financial Stability Board found Australia had the fourth-largest fintech credit market in the world, at $US276 million in 2015, across 29 fintech credit platforms.
This was dwarfed by China ($US99 billion), US ($US34 billion) and Britain ($US4 billion), but was larger than Germany, France, Japan and Canada.
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