Finexia taps investors for $50m securitisation facility as childcare fund grows assets

Non-bank lender Finexia Financial Group (ASX: FNX) has raised $25 million from the first tranche of a securitised note issue as the company capitalises on sustained growth in its Childcare Income Fund.

Finexia’s initial round is part of a $50 million securitisation facility that the company is planning to draw down further before the end of this year in a move that is aimed at driving assets under management for the fund to $100 million.

The latest tranche will boost the Childcare Income Fund to about $80 million in assets under management and provide the fund with the immediate financial resources to meet its existing pipeline of credit demand.

Finexia says the fund has recently expanded its reach from the eastern seaboard to service all Australian states as it capitalises on unmet demand for childcare centre operations and development funding nationally.

The Childcare Income Fund is designed to generate enhanced income returns for investors through the provision of financing solutions to experienced and successful childcare operators to open, trade-up, acquire and construct childcare centres across Australia.

The fund, which is currently returning 9.75 per cent annually paid in monthly instalments, provides investors exposure to private credit, an alternate asset class that in this case offers secured loans to childcare centre operators who are upscaling their business.

“It’s an area of lending that the banks have largely abandoned, and this has become a key area of focus for us,” says Finexia managing director Neil Sheather.

“As a non-bank lender, providing funding to the experienced operators in the childcare sector makes a lot of sense. 

“There is a structural soundness in the sector, which is effectively supported by federal funding through childcare subsidies and that delivers a firm foundation for us as a credit provider.”

The $25 million first tranche of securitised notes, completed through a partnership with Income Asset Management (ASX: IAM), was supported by sophisticated and wholesale investors.

“Our pipeline remains very healthy as we have now expanded our footprint Australia wide with borrowers in most states,” Sheather says.

“This is a national issue in a sector that is largely governed at the federal level in terms of subsidies, so it makes sense that we continue to assess opportunities in every state.”

Sheather describes the success of the first tranche of the $50 million securitisation issue as a significant milestone in Finexia’s transformation as specialist private credit provider.

“This is a genuine show of investor confidence in Finexia’s ability to write sound credit, coupled with its deliberate focus on financing the burgeoning childcare and early learning sector,” he says.

“The proceeds from the securitisation issue allow Finexia to expand its overall loan book in step with its pursuit of business activities exposed to revenues that are deemed recurring in nature.”

Through its partnership with IAM, Finexia says it is confident the company is positioned to maintain the growth momentum of its loan book’s exposure to the childcare and early learning sector.

Finexia posted a net profit of $3.21 million for FY23 following a surge in its core activities and interest-earnings assets, leading the company to declare its first ever dividend for shareholders. Finexia paid a dividend of 2c a share on September 29.