Finexia Financial Group has ended talks on a major disposal deal and is managing loan defaults with fresh collateral, while expanding its childcare lending strategy.
- Negotiations for sale of Creative Capital Group and FCFT management rights terminated
- External administrator appointed for defaulted Genius loans secured by childcare assets
- Additional $6 million in Mayfield Childcare shares secured as collateral
- Internal and external investigations underway into credit and regulatory practices
- Plans to broaden lending to include childcare property assets and review Stayco investment
Strategic Disposal Talks Cease
Finexia Financial Group Limited (ASX, FNX) has officially ended negotiations regarding the proposed strategic disposal involving Creative Capital Group Pty Ltd and the management rights to the Finexia Childcare Finance Trust. This move marks a significant pivot from the non-binding agreement signed earlier in March 2025, which included former CEO Patrick Bell among the investor group. Finexia has confirmed it will not pursue further discussions with this party or others at present, signaling a pause in its previously outlined divestment strategy.
Managing Loan Defaults Through Administration
During due diligence, Finexia identified deteriorating conditions with borrowers Vertical 4 Pty Ltd and Abacus 49 Pty Ltd, collectively known as Genius. To safeguard stakeholder interests and asset value, the company appointed Alan Walker of WLP Restructuring as external administrator. The $21.2 million exposure is secured against 11 operational childcare businesses, reduced from an original 27 centres to focus on viable assets. Finexia has established a special purpose vehicle, Shared Beginnings Pty Ltd, to hold these assets during recovery, partnering with Early Learning Management to stabilise operations and prepare for divestment.
Enhanced Collateral and Financial Position
Significantly, Finexia secured an additional $6 million in collateral in the form of fully paid shares in Mayfield Childcare Limited (ASX, MFD), boosting total pooled collateral to $35.1 million against the $21.2 million debt. While Finexia does not control these shares, it holds legal rights to call on them if defaults persist. Despite these challenges, the administration has not materially impacted Finexia’s revenue, which remains consistent with the prior financial year.
Investigations and Compliance Measures
In parallel with loan recovery efforts, Finexia’s Board has launched two investigations, an internal review of credit approval processes related to the Genius loans and a broader assessment of credit policies; and an independent external investigation into potential regulatory breaches within the Finexia Childcare Income Fund. The latter, focusing on the former CEO’s oversight, identified two breaches primarily concerning record keeping and asset revaluation, both of which are being addressed. These steps underscore Finexia’s commitment to transparency and regulatory compliance.
Strategic Expansion and Asset Review
Looking ahead, Finexia plans to broaden its lending scope to include childcare-related property assets, aiming to diversify risk and enhance portfolio resilience. This strategic expansion will be accompanied by a revised credit policy and updated business plan, though the company emphasizes this is an evolution rather than a fundamental change in focus. Additionally, Finexia is reviewing its Stay Company Income Fund (Stayco), an income fund focused on resort and holiday accommodation management rights, with potential revaluation and consolidation into the company’s financial statements under consideration.
Maintaining Core Operations Amid Challenges
Despite the intensive management focus on loan recovery and investigations over recent months, Finexia continues its core lending activities to childcare operators, supported by strategic financing partners Income Asset Management Limited and Global Credit Investments. The company remains compliant with ASX Listing Rules and is actively reviewing its strategy to ensure sustainable growth and risk management in a complex market environment.
Bottom Line?
Finexia’s decisive management of loan defaults and strategic recalibration set the stage for a cautious but potentially resilient future.
Questions in the middle?
- What will be the final outcomes and market impact of the internal and external investigations?
- How will the expanded childcare property lending strategy affect Finexia’s risk profile and returns?
- What are the implications of potentially consolidating the Stayco fund into Finexia’s financial statements?