JD Group plans to grow lending business

"We've seen good growth in our lending business. We're looking to diversify our range of products," CEO Grattan Kirk said.

On Tuesday, the retailer, which owns brands such as Joshua Doore, HiFi Corporation and Russells, successfully placed an offering of five-year convertible bonds at a nominal amount of R1bn.

The bonds will carry a coupon of 7.5% per year, and will be convertible into ordinary shares in JD Group at an initial conversion price of R56.71, representing a 30% premium to the five-day volume-weighted average price of JD Group shares up to 11 June, which was R43.62.

The share price fell 1.61% to close at R42.70 on Tuesday.

Abdul Davids, Kagiso Asset Management's research manager, said that JD was accessing funding at an attractive yield. "The R1bn is probably in excess of their requirements, but they are looking to grow their unsecured lending business that is the highest growth area of the market currently," he said.

Unsecured lending, which is a high margin business, is the granting of credit without assets being provided as security, at higher borrowing rates.

Rand Merchant Bank, a division of FirstRand Bank, and Standard Bank acted as joint book runners for JD Group's offering.

Davids said JD Group's future was looking better as a subsidiary of Steinhoff Holdings.

Steinhoff owns 50.1% of the furniture retailer after it raised its stake last month through a shareswap deal in which JD Group shareholders exchanged their shares for stock in Steinhoff's manufacturing unit, Kap.

"It has access to a larger parent's balance sheet and Steinhoff would probably want a more aggressive growth strategy," Davids said.

Source: Business Day