I just want to clear a few things up about debt warehousing, but first of all, let's put any potential correlation with Greensill to bed- Greensill went under because they behaved unethically and illegally, which eventually resulted in their insurance underwriters pulling the pin on them. I can assure you, Adrian is one of the most ethical and honest people you will ever meet, so CRO will NEVER be a Greensill. Now, to look at debt warehousing. Adrian has already said he was recently in 'conversation' with one of the Big Four, who, and I quote, said he actually needed a 'debt Red Sea'. Now whilst this speaks to the demand for CRO product, it also makes clear that CRO will be dealing with HUGE debt warehouse providers such as the big four banks and that they will be looking for a very large allotment of funds. To compare this to other successful companies, Afterpay had 5 warehouse facilities at the end of 2020, 3 of which were NAB and 2 US banks; Zip secured $100m from a US investment firm and partnered with NAB to raise a further $500m; and MoneyMe has established a $167m warehouse with Westpac.The good thing about having major banks and big private equity providing the warehouse is that the debts are strongly securitised. The Collateralized Debt Obligation (CDO) will likely have a low risk profile, based on S&P (Standard&Poor) credit rating. The type of businesses CRO has intimated they are dealing with are large Agri businesses, for example, which would have a long trading history and AAA or A A credit ratings. This type of debt that CRO would be chasing is low risk and heavily asset backed. Large tranches of finance will necessitate undoubtedly Securitisation Insurance which further protects all involved.All in all, I see that by establishing a debt warehouse, CRO is stamping its intent on the market, indicating its future directions and hinting at the magnitude of the demand for its products. The Invigo acquisition gives CRO an arm of proven finance involvement and expertise. The move of CRO into the world of debt warehousing can only be considered a massive positive step forward with the potential for exponential growth.
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