As many waited for the letter to arrive, one analyst said the...

As many waited for the letter to arrive, one analyst said the embattled consumer finance and commercial leasing group have to raise equity following the collapse of its deal with Latitude Financial.

Morningstar analyst Shaun Ler said the sharp deterioration in Humm’s profits revealed during the board’s battle to persuade shareholders to support the sale of the Humm consumer finance (HCF) division to Latitude left it at risk of breaching covenants.

Andrew Abercrombie, Humm’s founder and major shareholder, has campaigned against the sale. Craig Sillitoe

“We are wary that Humm may breach its covenants. However, we estimate its market price already compensates for a dilutive raising,” Mr Ler said in a note.

Although Humm does not disclose its covenants, Mr Ler said its forecast equity to receivables ratio would fall to 17 per cent – much lower than its five-year average of 27 per cent – without a $150 million to $300 million raising.

Morningstar also cut its outlook for Humm, saying the “bearish rhetoric from Humm’s board on HCF suggests its near-term prospects are difficult”.