I’m not sure those debt to equity ratios are a true comparison as you need to break down between limited or non-recourse debt and full recourse. It is common within the finance sector to have debts that are limited recourse to the debt assets (i.e. the Bank/Finance Company sells part or all of their loan book, generally locking in a realised profit on the loan origination and then the debt investor enjoys the return as the loan book sold is paid down and also wears the default risk - i.e. whether or not the level of defaults are above or below the level expected). These type of debt instruments can be structured in different ways and may include provision/loss absorption trust funds to account for expected loss performance. For these reasons when I do my own risk assessment on companies I exclude non recourse borrowings that are confined to on sold loans from gearing level and liquidity calculations. You do have to check the detail before doing this. Normally notes to the financials have additional info. I haven’t reviewed the other BNPL players but I believe the majority of HUM debt is limited or non recourse
HUM Price at posting:
86.5¢ Sentiment: None Disclosure: Held
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