Frontline seeks financier with deep pockets
By Nick Stride
Dunedin-based Frontline Finance is looking for an equity partner to reduce its reliance on bank debt and to fund growth.
The finance company, which has a $200 million loan portfolio, has appointed PricewaterhouseCoopers to identify parties willing to take a cornerstone shareholding or merge their operations with Frontline's.
An investment summary will be circulated shortly and a decision is expected to be made within the next few months.
Frontline was spun off from Motor Trade Finances (MTF) in 1996 to take over a $40 million portfolio of non-core loans.
It acquired a further $60 million of loans by buying Auckland's Amalgamated Finance and has generated $100 million through organic growth.
It is looking at ways to reduce its reliance on bank debt, which funds $160 million of its $189 million of total assets.
As well as seeking an equity injection it is securitising debt for sale into the Australasian and Asian wholesale markets.
Frontline has 1200 shareholders of which the largest are managing director John Gilks with 10%, MTF with 26% and Colonial Motor subsidiary Tara Services with 8%.
The shares are quoted on the unlisted securities market at 47c, valuing the company at $19 million. March 31 net tangible asset backing was 59.4c.
Frontline reported a $155,000 profit last year, down from $1.65 million in 1999. It blamed the fall on a $4.2 million provision for bad debts and said "deficiencies in credit management" had now been addressed.
It has three arms - business funding, which provides working capital to businesses; asset financing, which supplies non-recourse consumer vehicle finance through dealerships; and the management of Direct Home Loans, a home lending co-operative of real estate agents.
Eric Watson's Cullen Investments earlier this year put together a proposal to merge Frontline with its own finance company interests.
But it is understood the Cullen Investments' plan was never put to Frontline's board.
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