GLI Finance is considering an equity fundraising or corporate bond issue to help meet its forthcoming liabilities after posting an operating loss of £0.5m for the first half of 2020.
The Aim-listed alternative finance group said it has liabilities due in the next 12 months including a capital entitlement of the companies zero-dividend preference shares, a facility with Honeycomb Investment Trust and a £10m bond repayable on 30 June 2021.
A stock market update from GLI Finance said it is considering options regarding these liabilities, which include their repayment and/or extension, and is also contemplating a £2.5m equity fundraise or the issue of up to £15m of new corporate bonds.
The equity fundraising would be underwritten by Somerston Fintech and it would also subscribe £6m if GLI went down the bond route.
The decision will be discussed between the board and shareholders.
Read more: GLI Finance narrows losses
It comes as GLI Finance revealed the pandemic and a £4.2m write-down of its FinTech Ventures portfolio, which backs fintech lending platforms, had pushed it further into the red.
The write down pushed the group into a retained loss of £6.5m.
GLI Finance’s main lending business, Sancus BMS, posted an operating profit for the first half of the year of £0.1m, down from £0.3m in the first half of 2019.
“The Covid-19 pandemic negatively impacted our performance for the first half of 2020, contributing to an operating loss of £0.5m,” Andy Whelan, chief executive of GLI Finance, said.
“We were able to close just a few new loans during this period, largely because we were unable to carry out site visits which is key to us managing our lending risk.
“We have also taken a further material write-down on the FinTech Ventures portfolio with a net write down of £4.2m.”
Whelan said the fintech sector continues to grow, but increased competition, coupled with the impact of Covid-19 is making it difficult for smaller players, particularly those that are loss making, to raise further equity.
“Despite this, our overall performance was more positive than first anticipated at the beginning of March, with the receipt of some large exit fees and positive developments on certain assets that had previously been impaired,” he added.
GLI Finance also made staff cuts, reducing headcount from 34 to 29, which combined with other changes will save the company around £700,000, Whelan said.
He said the Sancus business has seen increased transactions since lockdown was lifted.