Any of you being impacted by the recent Aforti default? It looks like they have 10x debt to equity ratio 😱 (https://beta.simplywall.st/stocks/pl/diversified-financials/wse-afh/aforti-holding-shares).
Also, from their website, it says "Nominal value of debt collection commissions on July 2019 reached PLN 31 595,00 thousand. This is an increase by 6820.88% YoY. The number of recovery orders amounted to 8 866 and was higher by 110725.00% compared to July 2018. The company concluded seven contracts in the indicated month (higher by 75.00%)." aforti.pl/en/category/raports/
Sounds like they have a 100x increase in default??? 🤔🤔
Debt to equity ratio is actually closer to 13 and quickly increasing; however debt is still covered by short term assets. They have issued bonds with 7-8% interest rates and the loans offered at Mintos/Viventor platforms are 12% interest rate max. APR is usually ~70% so there is a good margin to cover for any loan defaults. But have they published average loan default rates?
Also, their stock price has nearly tripled in 1 year, how is this possible for a company with financial difficulties? Or is it market manipulation? 96% of shares belong to individual insiders and only 4% to general public. And how about the bond rates? Sure, 7-8% rates are in the junk territory, but they are still low (the lowest?) compared with those from other Loan Originators. For comparison, Mogo, an A-rated company which also happens to be the largest by volume loan originator on Mintos, has issued bonds with 9.5-10% rates. And Banknote/Vizia (SiaExpressCredit), rated at A- by Mintos, has issued bonds with 15% interest rate. Most of the other loan originators have been established only recently, are not listed in any stock exchange and/or have not issued any bonds yet (because they couldn't?). On the other hand, Mintos had recently down-rated Aforti to C+, do they have information the markets don't have?
Aforti was one of my favorite loan originators (well, i like to invest in business loans and there are not so many with buyback guarantees available on Mintos platform) and one that i also considered underestimated and somehow lower risk than average. This time it looks like Aforti's downgrading was well justified, but will that be always the case? Are we really safe (or safer) by investing only in A-B rated companies? I am not so sure about it. Anyway, let's hope it will all end up well for everyone that has invested in Aforti's loans.
Post by southseacompany on Aug 8, 2019 9:10:45 GMT
Something about this doesn't add up. Aforti was voluntarily redeeming some of its bonds one week ago. The company's share price is up 60% in the last month and is up for the day as I write this. If it is in financial distress, that must have happened so abruptly that neither management or investors were, or indeed are, aware of it. That would suggest either there's been major internal fraud, or in fact they are having technical difficulties and not real liquidity problems (although their explanation seems too fishy to believe that).
This may be a situation that one could not reasonably have predicted by looking at their financials and presentations -- a reminder of the importance of diversification, if one were needed.