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Australia's Kirwood Capital gets seat at Harmoney board

Monday 4th November 2019

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Boutique Australian private equity firm Kirwood Capital will play a hands-on role at Harmoney Corp after paying $15 million for a 13.4 percent stake in the peer-to-peer lender and getting a seat on the board. 

Harmoney last week raised $25 million of new equity from Kirwood and New Zealand investor Michael Lookman, whose interests took a 9 percent stake. The fintech firm had been hustling for fresh capital for several months, but found it harder this time due to a protracted dispute with New Zealand's Commerce Commission as to whether it was a lender or simply an intermediary. 

That didn't deter Kirwood, whose chief executive Luke Forster has joined Harmoney's board. He told BusinessDesk that Harmoney is positioned to succeed in Australia, where customers have been reluctant to use digital platforms to borrow money. 

"We see the New Zealand model as replicable. And so the leadership that Harmoney has in New Zealand is directly transferable into Australia," he said.

Kirwood has leap-frogged Trade Me and Heartland Group to become Harmoney's second-biggest shareholder behind founder Neil Roberts, who owns 30.8 percent, while Lookman's interests are the fifth largest. The 58.2 million shares issued to the new investors imply a valuation of about $86.7 million. 

Harmoney has been operating for five years and now employs 115 people. In that time, it has facilitated $1.4 billion of loans across almost 64,000 transactions and with more than $165 million of interest to lenders. 

The peer-to-peer lender was unexpectedly pulled up by the Commerce Commission in 2017 over the platform fees it charged, which the regulator claimed were unreasonable credit fees. The High Court backed that view, although an appeal is still in the mix. 

The commission's stance prompted Harmoney to tweak its business and start lending to borrowers financed by wholesale debt investors. It has a $100 million securitisation programme with Bank of New Zealand and as at June 30, it had $62 million in receivables. Last week, Harmoney set up an A$20 million corporate debt facility to support that operation alongside the equity raising.

Incoming Harmoney chief executive David Stevens said the debt and equity raisings will help the firm scale up its fledgling Australian business. 

Foster agreed, saying the Australian market is large and growing and that his firm would support Harmoney's existing momentum with its personalised offering a point of difference. 

"We really like how the business makes it easier for people to live their lives and do the things they want to do," he said.

Foster said Australia's royal commission into financial services added a further tailwind that was "amping the shift to digital" among Australians seeking finance. 

However, he said it wasn't a zero-sum game and that Australia had enough room for the existing banks to expand their digital offerings without detracting from Harmoney. 

"We don't think it’s binary - we win, they lose. It’s a large and attractive market and a number of players can be successful," he said. 

For now, Foster said the focus for Harmoney would be on growing the Australasian market, but he didn't discount other markets in the future.


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