Cash Converters (ASX:CCV) has exercised its right under the terms of a redeemable preference instrument to convert a $4 million dollar loan to 80% equity in Green Light Auto Group (GLA), trading as Carboodle.
Cash Converters also has a warrant deed in place to acquire the remaining 20% of GLA within a pre-agreed time period.
Green Light Auto was established in 2010 as a total motoring solution providing car loans to customers that do not qualify for traditional finance.
GLA is a licensed motor vehicle dealer and maintains a range of late model vehicles that it offers on four year lease inclusive of running costs such as insurance, maintenance and registration, for one simple weekly payment.
GLA has an exclusive licence with Cash Converters that allows it to use the Cash Converters Australian stores as its agent to promote its Carboodle brand, and pays a royalty to CCV and a commission to each store owner.
GLA has secured $40 million of funding to cover 80% of the purchase price of vehicles going forward with Fortress, a USA based lender, and boasts incoming forward contracted lease payments of $28 million.
Carboodle has undertaken limited marketing during its initial establishment period, only commencing a national marketing campaign in July this year, and already has showroom centres in Perth, Melbourne, Brisbane and Sydney.
This simultaneously demonstrates a very strong demand for their product, the growth available with future marketing efforts, and thus potentially handsome returns on investment for Cash Converters.
Highlighting its growth trajectory, Carboodle had 27 leases in 2010/2011, 207 leases in 2011/2012, 454 leases in 2012/2013 and 143 so far in 2013/2014, achieving total revenue of $5 million last financial year.
Carboodle offers Cash Converters another avenue to leverage its Australian network of 151 stores to expand its customer base.
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