SHANGHAI, June 17, 2019 /PRNewswire/ -- China Rapid Finance
Limited (NYSE: XRF) ("XRF" or the "Company") today announced the
signing of a cooperation agreement (the "Cooperation Agreement")
with Hongkong Outjoy Education Technology Co., Ltd. ("OET") to form
a new operating subsidiary of the Company (the "Project Company"),
which will operate an institutionally-funded Lend Aid platform
intended to become the Company's core business going
forward.
The new business will operate separately from the Company's
existing marketplace lending business. No retail funding will
be used for this new business. This new business will
leverage the Company's existing borrower base and technology and
facilitate a range of products for institutional investors, from
short-term to long-term installment loans. The Company's management
believes that the Project Company will be the engine of
transformation and future growth of the Company.
The Project Company's management team will be nominated by OET,
including the head of the Project Company, which shall initially be
Ms. Yang (Laurance) Liu. The
Project Company's management team will operate under the
supervision of the Company's Board of Directors.
The key terms of the Cooperation Agreement include:
- OET will invest an aggregate of RMB 100
million (in the form of U.S. dollars) into the Company over
the next six months in exchange for unregistered Class A ordinary
shares of the Company, subject to a one-year lock-up period. The
Class A ordinary shares will be issued at the weighted average
closing price of the Company's ADSs representing Class A ordinary
shares on the New York Stock Exchange for the 30 trading days
preceding the effective date plus a 30% premium. The investment
will be used to fund the operations of the Project Company.
- OET will secure lending capital for the Project Company from
licensed financial institutions in China that are qualified to grant loans, and
in exchange the Project Company will provide marketing services to
assist borrowers that seek to obtain loans and other relevant
services from such licensed financial institutions.
- The Company will also issue a warrant to OET to purchase up to
an aggregate of 66,402,480 Class A ordinary shares of the Company,
subject to the achievement of certain EBITA milestone targets by
the Project Company, which range from $3.7
million to $294.1 million, on
a trailing four-quarter basis. The purchase price per Class A
ordinary share is $0.0001 and the
warrant has a term of sixty-six (66) months. If the Project Company
achieves the maximum $294.1 million
EBITA target during the term of the warrant, OET will have the
right to purchase all of the 66,402,480 Class A ordinary shares
underlying the warrant.
- To help the Company to accelerate the transition to the Lend
Assistant model, an additional warrant to purchase up to an
aggregate of 66,402,480 Class A ordinary shares of the Company,
with terms and conditions substantially similar to the warrant
issued to OET, net of all loan repayments and recoveries, will be
issued to a special purpose vehicle and/or a limited partnership
entity established for the benefit of the existing lenders on the
Company's legacy marketplace lending platform. See more regarding
repayment of prior lenders below.
- Mr. Russell Krauss will resign
from his positions as co-CEO and Vice Chairman, but will remain on
the Board of Directors of the Company.
- Dr. Po Wang, co-CEO of OET will be appointed as co-CEO of the
Company.
- Following the completion of OETs full RMB 100 million investment into the Company, OET
will be entitled to nominate two additional independent directors
to the Company's Board of Directors. These nominations shall be
subject to approval of the Company's Board of Directors and the
ratification by the shareholders of the Company.
- Following the earlier of the completion of OETs full
RMB 100 million investment into the
Company or the achievement of the initial $3.7 million EBITA target for the Project
Company, the Company's current co-CEO and Chairman, Dr.
Zane Wang will resign as co-CEO and
Dr. Po Wang will become sole CEO of the Company. Dr. Zane Wang will continue to serve as the Chairman
of the Company, and will supervise the repayments and recoveries
for the existing lenders on the Company's marketplace lending
platform, as well as the value sharing mechanism through an SPV
and/or LPs (as described below).
Dr. Po Wang, of OET commented, "Partnering with China Rapid
Finance Limited is a fantastic opportunity for OET. China
Rapid Finance Limited is an established public company on the New
York Stock Exchange and has valuable competitive assets, a large
customer base and proprietary credit risk scoring algorithms.
Combining those assets with OET's talent and financial strength
will enable us quickly create a new marketing services business to
connect borrowers with licensed lending institutions, and we
believe XRF can rapidly grow into a market leader."
Russell Krauss, Vice Chairman and
Co-Chief Executive Officer of the Company commented, "This
initiative will be the first step to driving the fundamental
transformation of our business. The new unit will be a core
business for China Rapid Finance Limited going forward. We will
continue to explore other strategic alternatives that will help us
re-position ourselves in the growing consumer lending market in
China."
The Cooperation Agreement and associated transactions are
consistent with the Company's strategic decision to undergo a
transition away from its legacy marketplace lending business. The
Company will continue to manage its existing marketplace lender
base, and, through the use of its enhanced collection efforts, the
Company will continue to assist lenders to recover their
investments.
Dr. Zane Wang, Chairman and
co-CEO of the Company stated: "We are excited about this
transformation and partnership with OET. We believe this will
enable China Rapid Finance Limited to secure itself as a leader
with a long successful brand and heritage in the consumer lending
business. We are fully committed to continue servicing our existing
customers and transition our business into the institutional
lending model in an orderly and responsible manner and intend to
comply with all regulatory requirements and contractual
obligations."
The full Cooperation Agreement will be filed with the U.S.
Securities and Exchange Commission, and may be accessed through the
SEC's EDGAR website at http://www.sec.gov.
As previously disclosed, because of recent regulatory changes
and uncertainty in the marketplace lending industry, the Company is
suspending its consumer marketplace lending activities, and is
transitioning to a new business model. Since the Company's
marketplace lending new loan origination ceased, the loan portfolio
has experienced above normal levels of defaults. The Company
is continuing collection efforts on behalf of the lenders on its
marketplace lending platform. In order to help the Company
facilitate an orderly exit from the marketplace lending business,
OET has agreed to share the value generated by the Project Company
with the prior lenders on the Company's marketplace lending
platform to help accelerate the transition to the Lend Assistant
model, and learn the borrower credit behavior information from the
lenders. These efforts are also encouraged by local
authorities. The value allocated to the existing lenders on
the Company's marketplace lending platform shall be reserved for
them through a special purpose vehicle ("SPV") and/or limited
partnership ("LP") structure in the form of a warrant exercisable
for up to 66,402,480 Class A ordinary shares of the Company.
The terms of such warrant shall be substantially similar to the
warrant granted to OET, and will also be exercisable upon the
occurrence of certain EBITA milestones by the Project Company;
provided, however, that the value of the warrant granted to the SPV
or LP shall be reduced by the amount of any repayments and
recoveries received on behalf of the prior lenders through the
collection efforts of the Company or otherwise. Therefore,
the full amount of this warrant may only be exercised in the event
the Project Company generates EBITA of $294.1 million within five years and there are no
additional loan repayments or recoveries to offset this amount.
This amount may be settled in the form of cash, securities or other
form of value. The specific mechanism for the implementation is
subject to further discussion with the lenders and the local
authorities.
The Company also confirms that it intends to continue working
towards regaining compliance with both the listing requirements of
the NYSE and the reporting requirements of the SEC.
About China Rapid Finance Limited
China Rapid Finance (NYSE: XRF) is a leading fintech company
that operates an award-winning microcredit company and one of
China's largest online consumer
finance marketplaces. The Company enables affordable access
to digital credit for one of the world's largest untapped consumer
credit markets: China's
mobile-active consumers The Company utilizes its proprietary,
mobile-first technology to select consumers for its platform. China
Rapid Finance was founded by Dr. Zane
Wang, who has decades of consumer credit industry experience
in the U.S. and China. For more
information, please visit http://ir.crfchina.com.
About Hongkong Outjoy Education Technology Ltd
Hongkong Outjoy Education Technology Co., Ltd. ("OET"), with its
operational unit in China, is a
successful start-up company headquartered in Beijing. It was founded in 2015 by Mr.
Jian Song. OET's major focus is on
ecommerce-based financial services, as well as consumer lending and
personal loans.
Safe Harbor Statement
This press release contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements are made under the
"safe harbor" provisions of the U.S. Private Securities Litigation
Reform Act of 1995. These statements can be identified by
terminology such as "may," "will," "expects," "anticipates,"
"aims," "future," "intends," "plans," "believes," "estimates,"
"likely to" and similar statements. The Company may also make
written or oral forward-looking statements in its reports filed
with, or furnished to, the U.S. Securities and Exchange Commission,
in its annual reports to shareholders, in press releases and other
written materials and in oral statements made by its officers,
directors or employees to third parties. Statements that are not
historical facts, including statements about the Company's beliefs
and expectations, are forward-looking statements. Forward-looking
statements involve inherent risks and uncertainties. A number of
factors could cause actual results to differ materially from those
contained in any forward-looking statement, including but not
limited to the following: the Company's ability to satisfy the
requirements of PRC regulatory authorities regarding the repayment
of loans made by lenders on its platform; the success of the
cooperation arrangement with OET; the Company's ability to file its
Annual Report in a timely manner or regain compliance with NYSE
continued listing standards; the potential need to make adjustments
to prior period financial statements of the Company; unexpected
difficulties in the Company's pursuit of its goals and strategies;
unexpected developments, including slow growth, in the consumer
lending market reduced demand for, and market acceptance of, the
Company's products and services; difficulties keeping and
strengthening relationships with borrowers or investors;
difficulties of expanding data and channel partnerships,
potentially costly servicing activities; competition in the
consumer lending market; PRC governmental regulations and policies;
and general economic and business conditions in the regions where
the Company provides products and services. Further information
regarding these and other risks is included in the Company's
reports filed with, or furnished to, the Securities and Exchange
Commission. All information provided in this announcement and in
the attachments is as of the date of this announcement, and the
Company undertakes no duty to update such information except as
required under applicable law.
Investor Relations Contact:
The Blueshirt Group
Gary T. Dvorchak, CFA
gary@blueshirtgroup.com
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SOURCE China Rapid Finance