Investing

Mogo 10% Secured Debenture

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  • Feb 14th, 2018 3:55 pm
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[OP]
Deal Addict
Jul 27, 2017
2180 posts
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Mogo 10% Secured Debenture

recently launched secured 10% debenture runs for 36 months. Is this a good investment?

https://web.tmxmoney.com/quote.php?qm_symbol=MOGO.DB


source: Mogo investor relations


The Debentures bear interest from today’s date at 10% per annum, payable semi-annually on May 31 and November 30 of each year. The Debentures are conditionally listed for trading on the Toronto Stock Exchange (the “TSX”) under the symbol “MOGO.DB”, subject to the Company fulfilling all of the listing requirements of the TSX on or before August 4, 2017.

The Debentures will bear interest from the date of closing of the Offering (the "Closing Date") at 10% per annum, payable semi-annually ("Interest"). The Debentures will have a maturity date of 36 months from the Closing Date (the "Maturity Date").
13 replies
Deal Fanatic
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May 11, 2014
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Rankin Inlet, NU
It isn't a bad investment per say se, but keep in mind the risks of a debenture. In this case, Mogo isn't exactly financially stellar and has still to turn a profit. That being said, they have become net cash flow positive and are growing their business quite well. If you want to risk some of your money in them, it isn't a bad choice, but if I was going to risk my money, then I would go for the equity rather than low volume traded debentures. Essentially for the same risk, I would get a potentially better return.

EDIT: to keep Daverobev happier ;) Sorry, never knew that! :P
Last edited by xgbsSS on Aug 16th, 2017 5:52 pm, edited 3 times in total.
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Deal Addict
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Dec 8, 2010
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xgbsSS wrote: It isn't a bad investment per say, but keep in mind the risks of a debenture. In this case, Mogo isn't exactly financially stellar and has still to turn a profit. That being said, they have become net cash flow positive and are growing their business quite well. If you want to risk some of your money in them, it isn't a bad choice per say. But if I was going to risk my money, then I would go for the equity rather than low volume traded debentures. Essentially for the same risk, I would get a potentially better return.
Per se.

Sorry.
Sr. Member
Feb 21, 2010
886 posts
262 upvotes
Scarborough
Just look at their cost of debt on the balance sheet. They have borrowed at 15% + rates consistently. Their write off was around 7% of loan amount last time when I checked. So they need to lend at 22% to cover off their existing interest expense. Now tell me profile of borrowers at 22%

With my stellar credit profile, I have a pre approved offer of 15k at 16%. My wife has pre approved offer of 20k at 12%. They cannot make money lending to prime customers. In fact their customer base is deep sub prime
Deal Addict
Feb 26, 2008
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romeocanada wrote: Just look at their cost of debt on the balance sheet. They have borrowed at 15% + rates consistently. Their write off was around 7% of loan amount last time when I checked. So they need to lend at 22% to cover off their existing interest expense. Now tell me profile of borrowers at 22%

With my stellar credit profile, I have a pre approved offer of 15k at 16%. My wife has pre approved offer of 20k at 12%. They cannot make money lending to prime customers. In fact their customer base is deep sub prime

Is that a problem? Most of the banks extend revolving credit to pretty shakey clients in the form of credit card debt. Lend at 24%, incur losses of 7 or 8 percent, and life is grand?
Sr. Member
Feb 21, 2010
886 posts
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Scarborough
just for reference, banks charge off rate is less than 3.5% - so less than half of mogo

kneevase wrote: Is that a problem? Most of the banks extend revolving credit to pretty shakey clients in the form of credit card debt. Lend at 24%, incur losses of 7 or 8 percent, and life is grand?
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Sep 23, 2009
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kneevase wrote:

Is that a problem? Most of the banks extend revolving credit to pretty shakey clients in the form of credit card debt. Lend at 24%, incur losses of 7 or 8 percent, and life is grand?
romeocanada wrote: just for reference, banks charge off rate is less than 3.5% - so less than half of mogo
You have to remember that Mogo is relatively young.

Yes, making 1 or 2% on loans looks bad, but if it works, it snowballs into something much better.

That is, in time they don't have to borrow at 15% and lend at 22%, they can borrow at a blended rate of 6% and still lend out at 22%

Yes, I believe that Mogo - and others - are targeting at risk people for the most part. That is, these are people who wouldn't get a loan from a traditional bank - with lower rates.

I think they are saying they are a smarter option, but at this point, I don't think they can compete for prime customers. Maybe in 5-10 years they can, but for now, they have to settle with sub-prime borrowers.
Sr. Member
Feb 21, 2010
886 posts
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Scarborough
Mogo is acting like a mortgage broker. They are not suppose to use the proceeds from this debenture to fund mortgages.
newt_101 wrote: What about the new mortgage-lending rules that were implemented a few weeks ago?
Would they be beneficial to investing with mogo.db or not?
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Oct 24, 2004
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romeocanada wrote: Mogo is acting like a mortgage broker. They are not suppose to use the proceeds from this debenture to fund mortgages.
Thanks, but wouldn't it have an effect on how the fund would do in the grand scheme of things though?
[OP]
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Jul 27, 2017
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bottom of page 10 of the prospectus

https://www.questrade.com/docs/default- ... f?sfvrsn=0

"use of proceeds"

"The estimated net proceeds from the sale of the Debentures will be approximately $ ($ if the
Agents’ Option is exercised in full) after deducting the Agents’ commission of $ ($ if the Agents’
Option is exercised in full) and the expenses of the Offering which are estimated to be approximately
$ ($ if the Agents’ Option is exercised in full).
Mogo intends to use the net proceeds from the Offering to fund the growth of the Company’s loan
portfolio, with an emphasis on its long-term loan products. The Company’s loans are primarily funded
using two credit facilities with Fortress, with a portion of each loan funded by the Company. The net
proceeds of the Offering will be used to satisfy such portion of each new loan. Some portion of the net
proceeds may also be used to fund strategic acquisition opportunities in order to accelerate one or
more of the Company’s existing products and/or add additional products that complement its consumer
facing digital platform. See “Description of Existing Indebtedness” for a description of Mogo’s existing
credit facilities.
Pending such application of the net proceeds of the Offering, Mogo may elect to invest such funds, in
whole or in part, in short-term investment-grade securities or bank deposits.
The Company intends to use the estimated net proceeds as stated in this short form prospectus;
however there may be circumstances where, for sound business reasons, a reallocation of proceeds
may be deemed prudent or necessary"
Deal Fanatic
Aug 17, 2008
8926 posts
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porticoman wrote: anyone think mogo.db is still a good deal?

https://web.tmxmoney.com/quote.php?qm_symbol=MOGO.DB
Did anyone actually look at the TMX link? This is a Convertible Deb. Different pricing valuation/calculations from a vanilla deb. Traded by the equity side for a reason. IMO, for most ppl on this forum, you'll be better off looking at the common or passing.
Sr. Member
Feb 21, 2010
886 posts
262 upvotes
Scarborough
Today I received email that my pre-approved offer is expired and I can renew my offer with a soft credit hit. I completed the process and was offered $900 for $135 fees for 14 days. This is so funny, earlier I used to be approved for 15K to 30K for like 16% and now just for $900 pay day loan. Wow

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