Mortgage originator Finbond's private placing well received

Institutional investor appetite for the first mortgage origination company to list on the JSE, Finbond Property Finance, has been keen.

Shares in Finbond, which lists on the JSE's AltX on Friday, 15th June, have been offered to institutional investors in two parts an offer subscription for 65 million shares at a price of between 200 cents and 250 cents and an offer for the sale of a remaining 17,5 million shares at the same price.

The offers closed last Friday and both were substantially subscribed long before the cut off date. Such was the demand from institutional investors that no offers below 225 cents were considered.

Yaron Zimbler of Finbonds Merchant Bankers, Grindrod Bank Limited, says:

"The placement took place using a 'book building' process in terms of which invited institutions and private investors could apply for Finbond shares at a price between 200 cents and 250 cents per share.  Having given consideration  to the liquidity, tradeability and development of an orderly after-market in the shares of Finbond post the listing, together with the volume of applications received at the different prices within the price range, Grindrod Bank set the price at 225 cents per share, allocating in full the subscription and sale shares being offered."
 

A well pleased Finbond CEO, Dr Willie van Aardt, says:

"We are encouraged by the enthusiastic response from institutional investors to the private placement of our shares. I think this augurs extremely well for Finbonds future as a listed company."  

This is the first opportunity investors will have to gain access to the dynamic mortgage origination industry which is growing at around 30% a year and is now responsible for generating between 60% and 70% of all mortgage advances in SA.

Finbond, the country's fifth largest mortgage originator, is currently placing between R800m and R1 000m a month in private client mortgage finance.

The banks pay Finbond a commission on the mortgage applications it generates, usually between 1,8% and 2,3% of the value of the loan granted based on the volume of business the company places with them. Finbond, in turn, pays a commission to its introducers of business. The company has a network of 25 branches, 75 independent business units, 80 agencies and some 500 agents, brokers and consultants out in the field countrywide.

The business has four principal activities: mortgage origination; debt consolidation and equity release; bridging finance; and term loans. All are essentially linked to the core business of mortgage origination which is currently responsible for 29% of the companys gross profit.

Recently Finbond made four strategic acquisitions, acquiring 100% of Independent Bond Originations, Dimension Financial Services, Bondmaster and Blue Dot in order to bulk up its business ahead of the proposed listing. All four will become shareholders in Finbond after the listing.

Van Aardt says the current buoyancy in the property and mortgage origination market, additional economies of scale and synergies that will flow from the recent acquisitions and the fact that there should be further opportunities for consolidation in the mortgage origination industry once Finbond becomes a the country's first listed mortgage originator, make the company an exciting investment proposition.

The company turned in an after tax profit of R22,6m for the year ended February 2007 and is projecting that to rise to R58,8m in 2008 and R84,8m in 2009 mainly as a consequence of its recent acquisitions and the increased opportunities for inward business referral.