Turners strengthens ties with MTF by funding its first non-recourse loan product
Turners, the financial services firm formerly known as Dorchester Pacific, has strengthened its ties with Motor Trade Finance by funding a non-recourse loan product that will allow MTF's franchisees and dealers to sell vehicles to people with a higher credit risk.
MTF chief executive Glen Todd said in a statement that about 90% of the loans were expected to be for consumer purchases of motor vehicles, with the balance for commercial lending such as on trucks and machinery.
"The addition of a non-recourse product gives our franchisees and dealers greater choice to meet their individual appetite for risk and return, without exposing MTF shareholders to any additional risk," he said.
The 40-year-old vehicle finance company for auto dealerships has until now operated on a recourse basis, where MTF would provide the credit but the dealer would take on the risk of recovery if the loan went bad. That's an arrangement that's meant dealers and MTF are relatively risk averse compared to Turners, which along with its own $176 million loan book has an in-house debt collection arm, auction services and auto insurance. Non-recourse loans will leave Turners to chase defaulters.
Turners chief executive Todd Hunter said he was optimistic about the funding arrangement, which is backed by Bank of New Zealand for an initial two-year term.
"It's a way to pass on our scale and risk appetite to their originator network," Hunter told BusinessDesk. Turners didn't have a specific target of how much lending it would write but had projected that it could become "a $50 million ledger within two years."
Hunter said MTF is offering "a white-labelled lending product that we offer to the wider market."
Turners is sitting on a paper profit from its acquisition of about 8% of MTF at $1.15 a share. The stock last changed hands on Sharemart at $2.50 and there is currently a buy order for 40,000 shares at $1.50 apiece. While both Turners and Heartland Bank have circled MTF, the Dunedin-based auto-financier said in June that it had rejected all offers from parties that had expressed interest in buying into the business as too low or unattractive.
Turners shares rose 1.9% to $3.21 and have gained 7% this year, just ahead of the S&P/NZX 50 Index.'s 6.7% gain. MTF's $40 million of perpetual bonds with a coupon of 4.47% were last quoted on the NZDX at $63 per $100 face amount, down from as much as $76 a month ago.