Value smashed for Motor Finance Wizard

Keybridge Capital is to take control of sub-prime lender PR Finance Group, the operator of Motor Finance Wizard and payday lender AMX Money.

PR Finance has negotiated the sale in order to extinguish an A$11 million mezzanine loan (with an interest rate of 24 per cent) from Keybridge that it has been unable to refinance. Shareholders in PR Finance Group will vote on a scheme of arrangement to approve the sale.

The mezzanine loan will remain in place once the sale is finalised and its term extended.

Negotiations to sell PR Finance to its vehicle leasing business or to a third party will continue as well.

PR Finance will accept $1.5 million in cash and up to 2.5 million Keybridge shares (worth 16 cents each), putting a value of $1.9 million on the Queensland-based financier. Keybridge may also pay a further $1 million if PR Finance Group sells its vehicle leasing business on satisfactory terms business.

The consideration agreed is a far cry from the projected value of $354 million for PR Finance Group when the business was seeking to list on the Australian Securities Exchange in early 2007.

But a run-in with ASIC over its prospectus, and a flap over PR Finance Group's adherence to national consumer, law scuttled the float.

The business model of PR Finance has not yielded the benefits projected six years ago. Back in 2007, it said, in its prospectus, that it made a net profit of $3.7 million in the 2005/06 financial year and could increase this to $29.5 million by 2008.

In the year to June 2011, however, PR Finance made a loss of $821,000, following a break-even result the year before.

PR Finance has found it difficult to meet both sets of loan convenants under a senior facility from Commonwealth Bank and the mezzanine loan from Keybridge.

Keybridge has previously told the ASX that its borrower had signed a "non-binding heads of agreement to sell the vehicle leasing business to a major international corporation", with "definitive sale documentation... agreed."

Keybridge said yesterday that this sale process "remains in place [but] is yet to complete."

Other financiers may also be looking over the group.

PR Finance, which began operations in 2003, earns most of its revenue from providing vehicle finance to non-conforming borrowers. The business, Motor Finance Wizard, operates through a network of franchised used-car dealerships, offering an integrated vehicle sale, finance package and vehicle warranty.

Target customers include people with poor credit histories, self-employed people with insufficient documentation to support claims made about their incomes, short-term residents and recent arrivals.