Mogo Finance Technology, an online lender in Canada, has closed on a new revolving credit facility of up to $200 million from Fortress Investment Group. The new credit line will be used to finance the expansion of Mogo’s consumer installment loans.
The installment loan product, called MogoLiquid, was launched in November 2014 and has been gaining traction since. The company has increased the loan size to $35,000 with interest rates starting at 5.9 percent rates.
The Fortress announcement comes shortly after Mogo reported its second quarter 2015 results which showed a year-on-year increase of 137 percent in loan originations and revenue increasing by 122 percent.
“The new facility substantially increases the capital available to support the continued growth of our installment loans, while significantly lowering our cost of capital, both of which are key strategic objectives,” Greg Feller, president and chief financial officer at Mogo, said in a statement. “With the two credit facilities we now have in place, we have up to $250 million in available loan capital to grow our portfolio,” he added.
The firm signed its first credit agreement with Fortress in February 2014 at $30 million, with an accordion feature that bumped it to a total of $50 million. Fortress is also an equity investor in the Mogo platform.
The new facility has an initial commitment of $50 million and can be expanded up to $200 million with an initial rate of 9.5 percent based on the initial credit facility interest rate of LIBOR plus 8 percent with a LIBOR floor of 1.5 percent. If Mogo draws down more than $100 million, the incremental portion of the facility offers an effective rate of 8.5 percent for the first $50 million and a rate of 7.9 percent for the second $50 million. The tenor on the new facility is five years, with a two-year grace period before amortization payments kick in.
Mogo also issued common share purchase warrants to Drawbridge Special Opportunities Fund, Fortress’s flagship credit fund, to purchase 83,333 Mogo common shares. The warrants are exercisable at a price of $5.87 per common share for a period of 10 years from the date of issuance.
Fortress Investment Group a New York-headquartered alternative investment firm with approximately $72 billion in assets under management, as of 30 June. The firm has a large and well-performing credit business, which is headed up by Peter Briger. Fortress’s macro hedge funds have been struggling lately with poor performance and redemptions. Stuart Bohart, president of that business, stepped down from Fortress recently, as reported by The Wall Street Journal today (3 September).
Vancouver-based Mogo aims to provide loans to consumers through a convenient, transparent and quick process. Since launching its first online loan product in 2006, Mogo has executed more than one million loans.