Chesswood Reports Record Originations of $442MM & $1B Portfolio in 2019
MAR 19, 2020 - 6:55 am
Chesswood Group reported its results for the fourth quarter and year ended December 31, 2019.
“We had a record year w originations once again while our free cash flow, reduced by the $2.2 million of net expenses from our new startup Tandem Finance, remained strong at $22.4 million, well above our dividend level of $14.9 million” said Barry Shafran, Chesswood’s president and chief executive officer. “This was a very exciting and especially busy year for us, as we launched Tandem, renewed our two largest credit facilities, successfully completed our first marketed ABS transaction in the U.S. for $254 million and achieved $1.0 billion in total gross portfolio receivables,” added Shafran.
“Our fourth quarter and year-end results were also significantly affected by the IFRS 9 rules for the non-cash allowance for credit losses,” added Shafran. These new rules, adopted in 2018, continue to produce volatility in results. The rules penalize a company’s earnings when new business grows over the prior year, by requiring the immediate recording of an estimate of the next 12 months’ expected losses on all performing receivables, which includes all new originations in the period.
“We recorded $7.3 million of increased allowance in 2019 compared to the prior year. While it’s a non-cash measure that does not affect free cash flow, it has increased our overall allowance as well as unpredictability and volatility, in comparison to the prior method” said Shafran. “Some of this increase comes because as is typical, there was a rise in delinquencies and non-accruals in the fourth quarter in 2019 but there was an unexpected improvement in the fourth quarter of 2018. Consequently, our fourth quarter this year reflected a very large increase in the allowance over the same quarter of 2018,” Shafran said.
As of today, Canada and the U.S. are only weeks into the new Coronavirus pandemic. Financial markets and businesses across many industries are beginning to experience challenges. While it will be some time before the economic impact of the Coronavirus will be known, today Chesswood has a strong balance sheet with more than $150 million of equity, modest leverage with our banks, significant liquidity and availability in each of our funding facilities.
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