Sezzle share price: where next as $100m funding facility is revealed

Sezzle ramps up its growth agenda: yesterday announcing that it had secured a new US$100 million funding facility.

Funding secured

Yesterday Sezzle (ASX: SZL) announced that it had secured a New US$100 million funding facility – a move that has seen the young company more than triple the size of its prior facility.

It was unsurprising then – with bullish investors eying lofty growth opportunities in the buy now pay later (BNPL) sector – that the Sezzle share price was bid some 5% higher yesterday – finishing out the session at $2.52 per share.

Yet with the US market falling overnight, the Sezzle share price will likely be closely watched by investors during today’s session.

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Details of the latest deal

Looking at the specifics of this deal, it was revealed that Sezzle’s latest round of debt funding will be provided by Bastion Consumer Funding, Atalaya Capital Management and Hudson Cover Capital Management. Specialising in consumer and alternative lending, the three members of this lending ‘Syndicate’ will provide Sezzle with a ‘New Facility’ of up to US$100 million – more than tripling the size of the company’s Prior Facility.

The interest rate of the funding facility represents 'three month LIBOR + applicable margin.'

The minimum drawdown of this new facility is US$20 million in the first year and US$40 million in the second year.

Sezzle’s Chief Financial Officer, Karen Hartje also positively noted that 'the cost of this funding is on superior terms than the Prior Facility.' Finally, it should be pointed out that this New Facility replaces Sezzle’s Prior debt Facility – which was valued at US$30 million.

Where next: growth as a focus

Sezzle (ASX: SZL) – providing a concise description of its business model, commented that:

‘Funding purchases by End Consumers requires capital to enable Sezzle to pay retail Merchant Clients in advance of collection of the purchase price instalments from those End Customers.'

Ultimately, while the company can use equity or ‘client merchant accounts payable’ to fund purchases by these end customers – the current ultra-low-rate environment potentially explains why debt funding has been pursued.

Indeed, given Sezzle’s current growth profile – with the young company growing its user-base 49% in Q3 and its underlying merchant sales growing by 64% in that same period – its unsurprising that Sezzle is tapping the debt markets to ramp up its growth even further.

Sezzle is not the only BNPL provider to tap the markets for funding in recent times. Afterpay (ASX: APT) just recently finalised an approximately $200 million private placement with Coatue Management and Zip (ASX: Z1P) just yesterday wrapped up a $60 million capital raise.

Sezzle share price: CEO comments

Commenting on the newly secured funding facility, Sezzle's Chief Executive Officer, Charlie Youakim said:

'Sezzle is extremely pleased to have secured this new and much larger facility. It not only extends our existing relationship with Bastion Consumer Funding but also introduces Atalaya Capital Management and Hudson Cover Capital Management as new partners in the Company's growth and thereby diversifying the debt funding relations of the Company.

Speaking of what this means for the company's next steps, Mr Youakim further added that:

'This substantial increase in liquidity provided by our partners will underpin Sezzle's capacity to grow is offering to consumers and thereby aggressively grow our Underlying Merchant Sales.'

Following news of this news, the Sezzle (ASX: SZL) share price currently trades close to its 52-week high.


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