Zip Co upsizes securitisation deal but pays a pretty penny...

Zip Co upsizes securitisation deal but pays a pretty penny
Yolanda Redrup, Sarah Thompson, Kanika Sood and Anthony Macdonald
Sep 28, 2022 – 11.56am
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Buy-now-pay-later player Zip Co Limited is ready to haul in $300 million from the securitisation markets after upsizing its latest deal, but it will have to pay lenders way more than this time last year.


Zip Co co-founder Peter Gray in June, 2022: “All our overseas businesses have been written down.” Rhett Wyman/AFR

Potential investors were told Zip Master Trust Series 2022-1 would go up from the original $200 million advised by lead arranger NAB on Monday to $300 million - or $100 million more.

The upsizing indicates Zip’s got backers in the debt world. That’s a sharp contrast to equity investors who have pushed Zip shares downmore than 80 per cent since the start of the year and out of the ASX 200.

Debt financiers who are supportive of Zip’s prospects reckon it can get to profitability fast and is already so in its Australian pool, but has been diverting its funding to take a punt on offshore growth. Sources said Challenger had been a key investor in Zip’s past securitisation deals, and it wouldn’t be surprising to see it pop up again in the latest one.

With the upsizing, Zip seems to have braved the hostile capital markets and won over debt funds amid the shares’ battering.



Yet, there’s no denying that debt funding is an uphill climb for Zip compared to just a year ago when it did its last securitisation transaction.

To put it simply, Zip seems to have paid nearly twice the spreads to borrow half the money.

The latest deal, Zip Master Trust Series 2022-1, is paying 1.95 per cent to 12.5 per cent margin to scoop up $300 million.

Just 12 months ago, the Zip Master Trust Series 2021-2 only had to pay the 0.9 per cent to 6.3 per cent margins to get $650 million.

The market was also still wrapping its head around how Zip’s convertible notes will play out.

It’s got about $400 million worth of convertibles due after the latest securitisation notes mature in November 2023. How Zip rounds up the money to pay out convertibles (and why it paid $40 million of them early recently) is still a bit of a mystery.