morning’s news that Carfinco Financial Group had accepted a $15 million bought
deal from three investment firms took many by surprise in light of the fact
that the company has not taken new equity for close to half a decade.
Securities L.P., Stonecap Securities Inc. and Industrial Alliance Securities
Inc. are buying 1.54 million shares from treasury at $9.75 per share as well as
720 thousand shares in total from two directors, David Rosenkrantz and David
speaking with management, we learned that the directors agreed to the financing
at a special board meeting yesterday, Sunday the 24th.
also noted that Mr. Rosenkrantz and Prussky had agreed to offer stock to the
total offering to increase the size for the underwriters as they believed there
was market demand.
insider reporting, Mr. Rosenkrantz and Mr. Prussky continue to hold significant
discussion with management, it was made clear that this financing was NOT done
to raise additional equity at the request of its banking syndicate and there
has been no such request. In fact, CFN’s financial leverage ratios are well in
excess of any banking covenants.
We have seen
the stock slide from the $11 range since mid-March when the company released
its 2012 yearend financials. Even though earnings continued their year over
year increase, the annualized loss rate on finance receivables increased 2.3%
to 15.1% from 12.8%. While the market may have concerns about the increase, our
conversation with management pointed out that this is within the norm and is
not an indication of dark clouds on the horizon.
news release stated that the funds will be used to reduce indebtedness, for
general corporate purposes and for potential future acquisitions. We note that
the last point for use of funds is the first time we have seen this indicated
in a news release.