Meet VFD Group; They just raised N525m in debt notes at 19%pa

Tech driven charts. Photo by Olu Eletu on Unsplash
Tech driven charts. Photo by Olu Eletu on Unsplash

You probably haven’t heard of them before, but VFD Group is a financial services holding company with interest in Microfinance Banking, Bureaux De Change and Real Estate. The company also recently acquired Germaine Auto Center. The company is based in Lagos.

The group recently issued a Debt Note of about N300 million to a diverse pool of investors and offered interest rates of about 19%. The company revealed in its prospectus that the debts raised will be used to fund its working capital requirements.

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The company revealed in a press release sent to Nairametrics that its offering was 75% oversubscribed closing at about N525 million. They accepted N428 million of the amount received from investors. It is interesting to note that retail investors made up about 87% of those who took the offer.

According to Adenrele Omolara, the Head of Sales at VFD Group, “We thoroughly researched the investment market and discovered the need for a retail-focused, high yield and tradeable financial instrument promoted and issued by a company with an impeccable reputation”. She further added that the “excitement exhibited by investors towards the offer was an indication of the Group’s understanding of the market’s needs.”

CEO of the company, Nonso Okpala stated “VFD Group’s Debt Note affords retail investors an opportunity to earn a minimum interest of 19% with prospect of an enhanced yield as a result of the tradability of this financial instrument.”

Why is this significant

For a relatively unknown company, being able to raise over half a billion naira in debts from investors (not banks) is significant in a number of ways. For example, it shows that there is huge appetite for risky well structured finance for small businesses looking to raise short-term funds to finance their working capital or expand their operations.

It also suggest that with the right set of investors, small businesses can bypass traditional lending institutions like commercial banks to raise capital. Also worthy to note that the company only needed to provide treasury bills and equities as security against the debt offering. Banks currently charge as high as 26% for transactions like this and will demand security.

A shareholder in the company revealed to Nairametrics that this deal was significant for them as it serves as a formal introduction to corporate Nigeria, suggesting that there could be more offerings.

Would we have recommended that you invest?

Probably not, considering that it is a relatively new company. Also, we consider the coupon of 19% gross of tax relatively low, when you can get safer government debt securities (albeit longer tenured bonds) for a higher yield. However, this is one company to watch and we will be tracking them to see how well they utilize this funds and if they indeed repaid the loans on time. Important to note that February 2019, when the loan is due to be repaid, coincides with when Nigeria will be in the thick of general elections. It is typically considered risky time to invest in Nigeria.

Who is behind this company?

According to information on the company’s website, the Managing Director/CEO is Nonso who was Previously the Chief Financial Officer of Heirs Holdings, a company owned by Nigerian Billionaire Investor, Tony Elumelu. He also worked with KPMG, BGL, and UBA.

Also, the chairman of the company is Kunle Kayode Fadahunsi an ex Intercontinental Bank Plc, Access Bank Plc, BGL Plc and United Bank for Africa Plc employee.

VFD Group offer infographics

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