Medpro Finance Corporation has appointed IAM Capital Markets Limited and Trustees Australia Limited, together IAM and each a subsidiary of Income Asset Management Group Ltd (ASX: IAM), as Joint Lead Managers to exclusively engage investors regarding the funding arrangements for the newly created Medpro Pharmacy Unit Trust.
The notes will pay monthly coupons at a margin of 1-month BBSW + 6.0%. Delivering a first coupon of 8.3% – 8.4% and an implied yield to maturity of 9.65% – 9.75%.
The new dual tranche offering will comprise of a minimum AUD $20m, maximum AUD $40m Class A Notes with 20% Credit Enhancement (CE). The initial Trust size has been set at a minimum of AUD $30m. The issuer will retain the Class B Notes.
Medpro - Key Strengths
1. A senior secured warehouse is a portfolio of well diversified, secured loans (over 95%) largely to independent pharmacies and franchise groups.
2. The very low arrears profile for the pool is indicative of the health of their customer base.
3. The expected/typical recovery of a pharmacy loan is very high, between 85-100% of the original value so losses are typically non-existent.
4. Pharmacy businesses are relatively resilient across up/down economic cycles given the nondiscretionary nature of their product and strong pricing power.
5. The warehouse contains arrears and portfolio concentration limits (which alongside the 20% credit enhancement provided via class B subordination) should ensure the warehouse remains high performing over the course of the bond term.
Indicative Terms
About Medpro
Medpro Finance Corporation Pty Ltd (“Medpro”) is a specialist lending business with a focus on providing sophisticated finance solutions to medical professionals across Australia. Offering a unique and targeted value proposition, Medpro can offer fast, efficient, and innovative lending products which cannot be easily replicated by other lenders in the market − particularly banks. Medpro commenced operations in April 2017 and has now achieved five years of successful operations and continued book growth.
Medpro lends to all types of registered medical professionals and has developed its own expertise and know-how in lending to this sector, mostly capitalising on the gaps left by the commercial banks servicing this segment. Since Medpro opened for business, a genuine gap has appeared in the finance market between what the banks offer to medical professionals and what those professionals can safely borrow.
Medpro identified a compelling, demand-driven opportunity to establish a bespoke funding vehicle to cater to the needs of the pharmacy-lending sub-segment of the broader medical-lending market. Medpro observed that this growing demand from pharmacists and pharmacy groups is strongly supported by the following thematics:
• There is an increasing trend for pharmacists to group together in supportive ‘cooperatives’ that materially benefit from centralised administration and buying power. These pharmacy groups often require a reliable, flexible, and timely source of financing to enable their members to fund the purchase of pharmacies as acquisition opportunities become available.
• As the Australian pharmacy sector evolved, Medpro noted a continual trend of mature-age and lifetime pharmacists at or nearing retirement who want to sell their profitable businesses. Australia continues to train and certify world-class pharmacists, many of whom are interested in establishing their own businesses by way of purchasing existing, established, and cash-generative outlets. Many of these pharmacists require external funding due to the (often) material price barrier to entry (acquisition funding).
Additional information
Transaction Timeline
• General Bookbuild Open/Close : 14 September / 5pm 16 September
• Transaction Funding Date (EFT & DD): 26th September (or earlier)
• Transaction Settlement: 28 September (or earlier)
Please speak to your IAM Capital Markets relationship manager to register your interest in the transaction.
