Dolla wrote off nearly half the Evolve loan book

Dolla Financial Services Ltd wrote off nearly half the value of the loan portfolio it acquired from Supreme Ventures Ltd’s microfinance subsidiary on the day the deal closed, newly published accounts show.

“The group acquired a portfolio of 1,738 loans from Evolve Loan Co Ltd,” Dolla said in its interim financial statements.

The portfolio carried a gross value of $690.5 million. Dolla booked an expected credit loss provision of $323.3 million against it at acquisition – 46.8 per cent of the gross – leaving a net $367.2 million.

Dolla paid “no upfront cash consideration”. Instead, the company issued Evolve a promissory note with a principal of $367.2 million, matching the net value of the loans, carrying interest at 12.25 per cent a year. With $2.0 million in transaction costs, total consideration came to $369.2 million.

The note repays 30 per cent of principal in four equal quarterly instalments, with the remaining 70 per cent falling due on June 30, 2027. Dolla paid $38.75 million during the September quarter, of which about $27.5 million retired principal and the balance was interest, leaving $339.6 million outstanding.

The price is not final

“At the end of the term, the principal will be adjusted for non-performing loans and expected credit losses in the acquired portfolio,” Dolla said – a clawback that pushes further credit risk back to Evolve if the book performs worse than assumed.

Dolla treated the transaction as an asset acquisition rather than a business combination, on the basis that it bought only the loans. The accounting remains provisional and will be finalised before the year-end audit.

Announcing the deal in December, Supreme Ventures described the divestment as “a deliberate capital management initiative aimed at optimising group balance sheet efficiency, reducing credit risk concentration and improving risk-adjusted returns”. Dolla Chief Executive Kenroy Kerr said the acquisition would “have a positive and far-reaching impact on our loan book by improving balance, scale and growth potential”.

Supreme Ventures holds 375 million Dolla stock units, or 15 per cent. Mayberry holds an aggregate 46.3 per cent, largely through Mayberry Holdings Limited at 38.2 per cent and Mayberry Jamaican Equities Limited at 13.4 per cent.

Gary Peart is executive chairman of Supreme Ventures and chief executive of Mayberry Group Limited. He therefore sits on the selling side of the Evolve transaction and on the side of Dolla’s controlling shareholder. Peart has described the sale of the microfinance book as one of several liquidity events intended to cut leverage across the Supreme Ventures group.

Dolla’s loan portfolio, net of provisions, closed the period up 30 per cent at $5.94 billion, lifted by lending campaigns and the Evolve purchase. Loans unserviced for three months or more improved to 12.8 per cent of principal from 15.8 per cent a year earlier.

The company reported net profit of $216.1 million for the third quarter and $572.7 million over nine months, against $184.6 million and $435.4 million a year earlier.

business@gleanerjm.com