Liberty Financial reveals plans for $1.8bn listing

Float candidate Liberty Financial has signalled it plans to join the ASX as a $1.8bn company next month.

James Boyle, Liberty CEO. Picture: supplied

Float candidate Liberty Financial has signalled it plans to join the ASX as a $1.8bn company next month and pay an unfranked dividend in July, as it shrugged off other companies’ listing jitters.

The non-bank lending group is targeting a dividend payout ratio of between 40 per cent and 80 per cent of expected net profit, ­according to a prospectus released on Friday.

Liberty’s shares are scheduled to start trading on December 15, on a deferred settlement basis.

The company’s prospectus comes after other initial public ­offering candidates abandoned plans to list this week, largely on the back of weak investor interest. They included Fantastic Furniture and law firm HWL Ebsworth.

Liberty’s float plans were helped by founders, including Sherman Ma, retaining stakes and a handful of ­institutional investors agreeing to take cornerstone holdings in the IPO.

The prospectus said the lender, which operates in the residential home loan, motor and commercial finance and personal loan markets, planned to pay its first dividend in July to reflect the period from December to June 30.

The dividend “will not be franked, as this distribution is expected to be made from the trust,” the prospectus said. It pointed to a $35.5m-$70.9m payment, equating to between 11.7c and 23.3c per security on the forecasts contained in the document.

The prospectus puts expected adjusted net profit of $165.6m for Liberty in 2020-21, which includes amortisation of intangible assets, or a net profit of $153.9m.

The adjusted net profit is up from $142m last financial year. But the prospectus forecasts are for Liberty’s total income to dip to $838.2m in 2020-21, from $852.1m a year earlier, with total expenses also declining over the period.

As part of the transaction, Liberty is offering 53.4 million shares at $6 apiece, reflecting proceeds of a transfer of shares of $320.7m.

The founder group retains 77.4 per cent of the stock on issue after the offer and, while others trimmed their holding, Mr Ma is not selling down. Liberty’s chief executive is James Boyle, and Mr Ma, who founded the group in 1997, is an executive director.

Liberty chairman Richard Longes said the IPO would position the company to “pursue further growth” in segments where it had scale, as well as pushing into emerging markets.

“Liberty initially established itself in the Australian residential mortgage market. Over time, Liberty has leveraged its operating platform, proprietary technology, risk capabilities and intellectual property to expand into adjacent markets, including New Zealand, motor finance, commercial mortgages, personal loans, business loans, broking services and general insurance,” he said.

But the prospectus highlighted some pitfalls from Liberty’s proposed structure. The listed entity includes a company and a trust under a stapled structure. The company is liable for 30 per cent Australian tax, while the trust isn’t liable for local income tax.

The tax office may seek to apply legislation to tax the trust at 30 per cent, and the prospectus pointed to the prior local holding company of Liberty having received “amended assessments” from the ATO for past years.

“These amended assessments remain unpaid and MFG has objected to the amended assess­ments. The ATO may issue fur­ther amended assessments to MFG for additional periods up to the date of reorganisation,” the document said.

If Liberty is forced to pay the ATO assessment there are repayment terms in place for another entity, which includes the amounts being offset by future dividends or distributions.

The prospectus showed Credit Suisse, the IPO investment bank, is in for a bumper payday of about $7m when Liberty hits the ASX.

Key investor risks identified in the prospectus include higher than expected loan losses stemming from COVID-19. But as of September, only 0.4 per cent of Liberty’s customers were on loan repayment pauses.