IMF Bentham has sold its stake in the European joint venture and will realise additional profit in FY16
After a deadlock in negotiations with its European joint venture (JV) partners, IMF has sold its stake in the European JV to one of the JV parties (Innsworth) for EUR4m. IMF will no longer have an interest in the VW and Tesco matters, and is precluded from funding matters in the relevant European jurisdictions for 12 months. A link to the announcement is available here.
The existing co funded matters in relation to Wivenhoe Dam and S&P are unaffected by the announcement.
We see the news as moderately credit positive for IMF. According to the company, Europe is a relatively more complex jurisdiction compared to Australia and the US where the majority of IMF’s current investment portfolio sits. In addition, Europe is considered to have more extensive adverse cost risks than the Australian, US and Asian markets. Progress in the European market was relatively slow for the joint venture, with only 2 cases receiving funding approval over the past 2 years; the exit allows management to focus on IMF’s core businesses.
While IMF has given up the potential upside of successful outcomes on the VW and Tesco matters, it expects to realise a $3m to $4m profit in FY16 from the sale and is now no longer obliged to offer Innsworth co funding options in relation to future matters which arise in the Asia Pacific region. From a practical perspective, it has also removed the downside risk of an unfavourable outcome in these matters and the exposure to potentially high adverse costs. The sale proceeds are now expected to be available to fund matters in IMF’s core Australian and growing USA markets.
The IMF Bentham 7.40% fixed rate bond maturing in June 2020 is indicatively offered at $102.75 and a yield to worst (in this case to the maturity date of June 2020) of 6.60%.
Please contact your FIIG representative for further details on the IMF Bentham AUD bond. Available to wholesale investors only with a minimum face value of AUD10,000. Pricing is indicative only and subject to change.