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IPF upgraded to buy by Shore Capital following refinancing

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International Personal Finance PLC (LON:IPF) has been upgraded to ‘buy’ from ‘hold’ by analysts at Shore Capital as the broker said a successful refinancing by the non-standard lender had removed the risk of a near-term breach of its debt covenants.

In a note on Friday, ShoreCap said that while the new loan notes had resulted in a step up in coupon rates and undisclosed costs, they believed this expense “is well worth incurring in order to remove the significant near-term refinancing risk”.

READ: IPF returns to profitability and plans bond refinancing

“We already had a step up in funding costs in our forecasts which is largely offset by balance sheet shrinkage and, as such, we do not expect to make material adjustments to our forecasts”, the broker added.

ShoreCap also upped its target price to 110p from 75p as the refinancing risk was removed, which in turn necessitated the rating upgrade.

“We believe that non-standard lenders such as IPF provide an essential service to society, allowing customers who could not normally access credit from mainstream lenders to do so.  Furthermore, we expect demand for such services to increase as a result of the coronavirus crisis, given that more people are likely to suffer credit issues and be subsequently turned away by mainstream lenders, the broker added.

On Friday, IPF announced a successful new 5-year bond issue and amended covenant package across all of its bonds, which it said left it with “strong liquidity, no material near-term debt maturities and an appropriate and uniform covenant package”.

IPF chief executive Gerard Ryan added that the refinancing will “provide the financial foundation on which we will continue to enable financial inclusion of consumers underserved by mainstream lenders by fulfilling their credit needs responsibly”.

Shares in IPF rose 5% to 66.6p in mid-morning trading.

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