AFRAs talk increases that lenders such as National Australia...

AFR

As talk increases that lenders such as National Australia Bank and Westpac are becoming more wary of pricing their funding outside the reach of some of their heavily battered competitors, questions are circling on which lenders are actually differentiated enough and profitable enough to survive.

MoneyMe neatly sums up the challenges facing the non-banks right now: it took on debt to fund its merger with SocietyOne, interest charges increased, and when the lender tried to get away a $20 million equity raising in February last year, it instead landed deeper in the arms of Pacific Equity Partners.

It has until June to muddle its way out of a debt burden at its head company level that will likely require it to offload all or parts of its personal lending business. Of the $75 million owed on a facility extended at its head company level, it needs to find $25 million by the first quarter of the 2024 financial year, with PEP expecting a deal to be announced by June.

MoneyMe chief executive Clayton Howes says the lender has “ongoing interest from several credible parties, and we have, of course, planned for a variety of solutions”. The company also points to its interim profit of $8.79 million and work to cut operating costs as proof it has a future.

But auditors highlighted material risks about its ability to remain a going concern, and RBC analyst Wei-Weng Chen says “limited visibility into any potential capital transaction makes it considerably difficult to provide an investment view”.

Following Credit Suisse’s spectacular fall on Thursday, MoneyMe shares plunged more than 17 per cent to just 12¢, suggesting even the window for a deeply discounted rights issue may have now closed, with its market cap at $34 million.

On the question of a raising, Howes says: “MoneyMe is assessing all options available to us under the strategic capital initiative with Morgan Stanley.”