General Capital (GEN) Subsidiary Credit Rating Update

General Capital Limited
Level 8, General Capital House,
115 Queen Street, Auckland CBD
PO Box 1314, Shortland Street,
Auckland, New Zealand. 1140.
Phone +64 9 304 0145


Equifax Reaffirms General Finance Limited’s BB Financial Strength Rating

General Capital Limited is pleased to announce that global credit rating agency
Equifax Australasia Credit Rating Pty Ltd (Equifax) has reaffirmed the financial
strength rating of General Capital’s 100%-owned subsidiary, General Finance Limited,
at BB with a stable outlook. This follows a review of its six-monthly audited accounts
as of 30 September 2024.

The rating reflects General Finance’s increased scale, healthy earnings, and sound
capital and funding profile.

General Capital’s Chairman, Rewi Bugo, welcomed the confirmation from Equifax,
stating that this outcome recognizes General Finance’s continued growth in assets
and earnings despite the challenging macroeconomic environment.

“This acknowledges that General Finance is in a strong position to continue delivering
on our strategy to achieve long-term growth and is well-positioned to navigate the
challenges and opportunities presented by the Deposit Takers Act and the Deposit
Takers Compensation Scheme,” said Mr. Bugo.

Mr. Brent King, Managing Director, added, “We continue to notice that investors are
increasingly considering credit ratings when making investment decisions in Secured
Term Deposits. In the current market, sound credit ratings are a critical part of a
prudent investor’s decision-making process.”

ENDS

This announcement has been authorised by Brent King, Managing Director, General
Capital Limited.

For further information contact:

Brent King
Managing Director
General Capital Limited
+64 21 632 660
Brent.King@gencap.co.nz

17 December 2024

---

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Credit Rating Synopsis
Date: 10 December 2024
Prepared for: General Finance Limited
Report prepared by: Equifax Australasia Credit Ratings Pty Ltd (“Equifax”)
Primary Analyst: Brock Ackerley, BCom
Secondary Analyst: Maksym Razdorozhnyi, FRM
Job Number: 394938
Currency used in this report: This report is presented in New Zealand Dollars unless otherwise noted.
General Finance Limited
NZBN: 9429038072994

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Contents
Contents .................................................................................................................................................................................. 2
1.Executive Summary ......................................................................................................................................................... 3
2. Scope of Report ................................................................................................................................................................... 4

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1.Executive Summary
General Finance Limited (“GF”, “the Company”)
Risk Rating
GF is a Non-Bank Deposit Taking (NBDT) organisation that is licenced by the Reserve Bank of New Zealand (the RBNZ) and
domiciled in New Zealand. The Company offers loans and accepts customer deposits.
Equifax Credit Ratings Australasia Pty Ltd (‘Equifax’) has affirmed GF’s credit rating of ‘BB’ at Sep24, which is a near-prime
classification with a low to moderate level of risk. The outlook for the rating is ‘Stable’. Overall, GF’s credit rating benefits from
its market position as a specialised bridging loans provider, its scale and healthy earnings, sound capital and funding profile,
acquisition of insurance premium lending business and the expected benefits from the proposed regulatory reforms. The risks
to GF’s credit rating arise from the challenging macroeconomic environment and GF’s broader business model risks (which
include market risk factors and a moderate degree of concentration risks), underlining some asset quality pressure as well as a
high reliance on key executives’ expertise, thereby exposing it to key-person and business continuity risks.
Strengths
-GF’s healthy competitive position is supported by its 25+ year operating history as a specialist bridging loans provider catering
to a market underserved by many industry competitors. It is further evidenced by a rapid growth, experienced by the Company’s
loan book between Mar19 ($17.3m) and Mar24 ($132.7m) with a five-year compound annual growth rate (CAGR) of 50.4%.
-Despite its rapid growth, GF has maintained a consistent level of operating flexibility over the period under review, having
reported a relatively stable rate of return on assets (1HFY25: 2.0%; FY24: 2.0%; FY23: 2.8%; FY22: 1.9%).
-A sound capital ratio of 21.7% at Sep24 (Mar24: 22.3%) enables GF to maintain adequate headroom above the regulatory
minimum capital ratio threshold (8.0%). The Company’s capitalisation has been supported by strong earnings retention along
with incremental capital injection. This holds GF in good stead to support future loan book growth and/or withstand some
moderate shocks. While the Company’s capital ratio is likely to reduce with the recent addition of unsecured loans in GF’s
portfolio, it is expected to remain at a satisfactory level.
- GF’s demonstrated capacity to attract deposits supports its healthy funding and liquidity profile. We note that over the period
under review the Company’s deposit base generally grew faster than its loan book, which underpinned a steady increase in GF’s
cash reserves (including bank deposits). At Sep24, the Company reported cash reserves of $38.1m (Mar24: $22.6m; Mar23:
$18.4m), which were equivalent to 24.1% of its deposit base (Mar24: 16.7%; Mar23: 16.7%), thus supporting the Company’s
capacity to meet obligations, and fund future organic/inorganic growth objectives.
-The Company has recently completed acquisition of an insurance premium lending business, which is expected to enhance its
profitability, improve diversification and support the liquidity profile of GF. At the same time, we note that the acquisition was
relatively small scale (acquired loan portfolio of <$9.0m), while the associated risks and benefits from this acquisition are yet to
be tested.
-Deposit Takers Act (‘DTA’), which received Royal Assent on 6 July 2023, aims to place all deposit takers under one framework
and introduce a depositor compensation scheme, ultimately promoting public confidence in the sector and improving
attractiveness of NBDTs deposits, in our view.
Constraints
- Together with the wider economy, the NBDT sector, including GF, continues to face significant macroeconomic headwinds due
to a slowing economy and housing market. As a result, GF’s asset quality remains under pressure, evidenced by an elevated
amount of loans in arrears compared to historical levels (Sep24: 10.1%; Mar24: 7.8%; Mar23: 13.3%; Mar22: 3.3%; Mar21: 3.7%).
The challenging market environment and potential shrinking of existing and/or future collateral cover due to weakening of the
property market, also puts pressure on LVR of existing loans and constrains the Company’s ability to grow in accordance with
the management’s conservative lending approach that focuses on lower LVR loans.
-The Company’s operations are exposed to a moderate level of client concentration risks, as its 10 largest loans at Sep24
represented 24.7% of the entire portfolio, thus making the Company’s financial performance materially dependent on credit
risks of a handful of borrowers.
-GF has a significant dependence on Managing Director, Mr. Brent King, which exposes business operations to keyperson risks.
As the public face of the Company, Mr. King has an active involvement in regulatory developments, liaises with key stakeholders
and lends his commercial expertise and business acumen as the final sign-off authority for all loans. In Equifax’s view, GF’s ability
to execute its future growth strategy and successfully navigate through a challenging macroeconomic environment has a high
reliance on Mr. King’s expertise and may benefit from addition of appropriately qualified and experienced professionals to handle
some of these specialist responsibilities.
The outlook for the rating is currently ‘Stable’ and a rating upgrade is unlikely in the near term. An upgrade would require a
demonstrated sustained improvement in scale and market position, combined with a sustained reduction in asset quality risks,
and material reduction in keyperson and business continuity risks through an increase in the pool of key executives. The rating
may be revised downward if there is material deterioration in either GF’s earnings, scale or asset quality.
BB
Outlook: Stable
Type: Public, Monitored
Industry Percentiles

*annualised
Scale:Percentile
Total Assets75%
Gross Loans67%
Profitability:
NIM42%
ROE92%
ROA75%
Efficiency Ratio75%
Capitalisation:
Leverage (Gross loans to Equity)33%
Capital Ratio
75%
Capital to Total Assets
33%
Funding and liquidity:
Deposits to Loan Ratio
75%
Liquid Assets to Total Assets
33%
Asset Quality:
Net Charge-offs
100%
Impaired Loans
100%
Provision for Loan Losses
58%
Key Trends

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2.Scope of Report
The purpose of this report is to provide a Credit Rating Synopsis on General Finance Limited (“GF”, “the
Company”).
We have complied with our rating services guidelines in order to derive the credit rating on General Finance
Limited. The credit ratings and observations contained herein are solely statements of opinion and not
statements of fact or recommendations to purchase, hold or sell any securities or make any other investment
decisions. The details pertaining to this report are outlined below:
Report Details
Date of Report 10
th
December 2024
Request Type Issuer
Assessment Type Under Ongoing Monitoring
Rating Initiation Issuer based (solicited)
Rating Distribution Public Rating
Report Distribution Unrestricted
Purchased by General Finance Limited
Report Fee Fixed Price
Ancillary fees Nil
Issuer Name General Finance Limited
Issue Name Not Applicable
Issuer First Time Rated No
Issue First Time Rated Not Applicable
Financial Scope Standalone Entity
Structure Limited Company
Industry Financial Services
Sector Non-Bank Deposit Takers
This report should be read within the context of Corporate Scorecard’s Rating Services Guide. This Report should
be taken as a whole and cannot be abridged or excerpted for any reason.
We have conducted this assessment on the basis of the information provided to us by General Finance Limited,
publicly available information and from our own enquiries. We have derived a credit rating on the Company
based on the understanding that General Finance Limited has no contingent liabilities, cross guarantees or other
liabilities to any other entity other than as disclosed to us or as detailed in the financial statements. Our duty
does not include auditing the financial statements.

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Information Sources
Financial statements
Audited Interim Financial Statements for the 6-month period
ended 30 September 2024.

Audited Financial Statements for the years ended 31 March
2024, 2023 and 2022.
Name of auditor
Grant Thornton New Zealand Audit Limited
Other Information Sources
The Company’s response to our Request for Information, the
Company’s website, industry and regulatory websites,
management interviews, media articles, adverse searches
and internet searches.
Subject participation Full
Material financial adjustments None
Limitations of assessment None
Outsourced rating activities No
Confidentiality agreement No
Material client No
Rating amended post issuer disclosure No
Potential conflict of interest
GF is also a user of other Equifax products which are procured
on commercial terms.
Rating methodology Financial Institution Rating Criteria


This report should be read within the context of Equifax’s Ratings Services Guide.

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APPENDICES
1. Explanation of the Equifax’s credit rating

1.1 What is a rating?

Credit ratings provide an Agency's opinion as to the capacity, viability and willingness of an entity, issuer, or
counterparty to meet their respective financial commitments. As such, Equifax assigns ratings based on the credit
worthiness of an entity, commitment, or product, and provides probabilistic assessments of default over the
short, medium, and long-term.

Credit ratings are a critical measure used extensively in commercial, financial, and capital markets to support key
business decisions. Equifax’s credit ratings are used to support debt and bonding decisions, loan origination and
recovery, insurance and warranty, funds management, portfolio management, tendering and procurement,
counterparty risk assessments and other commercial contracts.

Equifax provides credit ratings on government and commercial agencies, international conglomerates,
infrastructure consortia, financial institutions, publicly listed entities, private corporations, and small-to-medium
sized enterprises across a range of industry sectors both domestically and internationally. As such, Equifax is also
able to provide detailed industry intelligence, benchmarking reports and analysis across a wide range of sectors.

1.2 Equifax’s credit rating

Equifax and other credit rating agencies all attempt to measure the probability of an entity being able to honour
its financial commitments as and when they fall due. The most recognised credit rating is that based on Bond
Rating Equivalents (BRE) used over the past eighty years to determine the proximity of an entity’s securities to
default (non-payment of interest or principal). The accuracy of this method has been extensively tested and is
accepted worldwide.

The Equifax’s database contains more than 100,000 financial years of information spanning more than twenty-
five years. As such Equifax is in a unique position, having developed a large and empirical data source on entities
across various industry sectors with long data histories covering a range of economic conditions and one or more
complete business cycles. Equifax has therefore been able to use a variety of quantitative validation tools and
comparisons using this information to adequately verify the stability, accuracy, and consistency of its rating
models.

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Equifax’s rating models have been designed to assess the proximity of an entity to defaulting on its financial
commitments and obligations. Proprietary risk analytics are used to evaluate the multivariate interrelationship
of key risk indicators using scientifically based and empirically derived risk metrics. These models evaluate the
financial performance, position, and profile of an entity in the context of its industry, size, and structure. They
have been validated on Australian and international data with the assistance of Professor Edward Altman, an
internationally recognised leader in the field of credit risk analysis and bankruptcy prediction.

Equifax uses its comprehensive benchmarking database to evaluate the financial position, performance and
credit quality of an agency, institution, corporation, or entity relative to an industry and its peers. This enables
the identification of key sensitivities, trends, cautionary alerts, and exception reports based on identified
anomalies and/or outliers across key credit indicators of a select benchmarking group.

While there is no single method to discriminate unambiguously between firms that will default and those that
will not, Equifax can make probabilistic assessments of default. This requires a large database of actual defaults
to enable an assessment of default probabilities and actual default rates from empirical evidence. The
Australasian market has a comparatively small number of corporate bond issues and a relatively benign credit
climate over recent decades, and as such empirical data on Australian default rates is limited. Therefore, Equifax
considers it is more appropriate to apply default probabilities using empirical data from international markets
over several economic cycles.

Equifax’s default statistics have been derived from nearly twenty years’ experience analysing mainly US non-
financial, non-utility corporate bond issuers. The analysis covered a relatively large number of companies
(approximately 1,000 rated each year) and follows the well-established static pool approach used by Credit Rating
Agencies to report their default experience. Static pools were created for bond issuers each year by both notch
and grade, and the history of these bond issuers was then analysed over the period. The pools were then
combined so that long-term average default experience by duration could be calculated, and both annual and
cumulative default experience was calculated from the pools.

Equifax’s risk analytics enable analysts to evaluate the most critical and sensitive financial and risk items through
the Risk Assessment Platform by analysing key indicators to derive a definitive credit risk score and Bond Rating
Equivalent (BRE), providing Probabilities of Default (PoD) over the short-, medium- and long-term horizon.

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1.3 Rating Definitions

Credit ratings provide an Agency's opinion as to the capacity, viability, and willingness of an entity to meet their
respective financial and contractual commitments. As such credit ratings are assigned in accordance with the
entity, commitment, or product's proximity to default. Equifax adheres to internationally recognised grades and
are similar to other agency classifications, providing ratings across twenty-two credit notches from ‘D’ (in default)
to ‘AAA’ (extremely strong).

Moody’s Fitch S&P
Rating Default rates
(5 years)
Classification Risk Level
Aaa AAA AAA AAA 0.17
High Grade

Negligible
Aa1 AA+ AA+ AA+
0.31
Aa2 AA AA AA 0.44
Aa3 AA- AA- AA- 0.55
A1 A+ A+ A+ 0.76
Investment Grade

Very Low
A2 A A A 0.81
A3 A- A- A- 1.47
Baa1 BBB+ BBB+ BBB+
2.08
Low
Baa2 BBB BBB BBB 3.19
Baa3 BBB- BBB- BBB- 4.37
Ba1 BB+ BB+ BB+
7.13
Near Prime

Low to Moderate
Ba2 BB BB BB 7.49
Ba3 BB- BB- BB-
10.52
B1 B+ B+ B+
16.34
Sub Prime

Moderate
B2 B B B
22.21
B3 B- B- B- 24.16 High
Caa1
CCC
CCC+ CCC+ 28.16
Credit
Watch

Very High
Caa2 CCC CCC 29.90
Caa3 CCC- CCC- 39.16
Ca
CC CC 52.87
Distressed

Extremely High
C C 55.00
C
D
D D 100.00

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Equifax assigns ratings based on the credit worthiness of an entity or a specific financial commitment, and
provides probabilistic assessments of default over the short, medium, and long-term. Every entity or
commitment has some probability of default over a period of time, even those assigned with the strongest of
ratings. An Investment Grade classification is attributed to credits that exhibit a lower probability of default, while
a Sub-Prime classification has a greater expectancy of default.

An Equifax’s credit rating may also be assigned additional clarification markers (symbols) to qualify the credit risk
assessment. These may include:

Conditional Rating (#)
A Conditional Rating is used where Equifax has rated an entity on the basis of significant risk factors and/or report
qualifications, with recommendations providing one or more conditions precedent and/or mitigation action(s) to
reduce identified uncertainty and risk.

Provisional Rating (*)
A Provisional Rating is used when the most recent financial figures are based on draft management accounts or
are deemed out-of-date. Entities with a provisional rating should be re-evaluated as soon as finalised financial
statements become available.

Indicative Rating (^)
An Indicative Rating is used where Equifax is engaged to conduct preliminary analysis only, and as such an official
rating assignment would require a more detailed and comprehensive investigation and due diligence assessment
prior to the provision of our professional opinion.

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1.4 Rating Outlooks

Equifax’s forward estimates help ascertain the trajectory of ratings as well as the risks to ratings. Ratings with a
positive trajectory are assigned ‘Positive Outlooks’. Ratings with a negative trajectory are assigned ‘Negative
Outlooks’. Where Ratings are expected to remain unchanged, a ‘Stable Outlook’ assigned.

Rating trajectories are closely related to the outlook for the corporate’s earnings. Earnings growth that is within
sustainable growth parameters together with an attenuation of earnings volatility provide upward rating
pressure and so may warrant the assignment of a Positive Outlook.

Credit Concepts measured

The main credit concepts measured against Australian and New Zealand Standard Industry Classifications
(ANZSIC) and specific Peer Groups based on entity size are available in Corporate Scorecard’s Rating
methodology, which can be found at the below-mentioned links

http://www.corporatescorecard.co.nz/services_credit_ratings.php
https://www.corporatescorecard.co.nz/docs/RatingMethodologyFinancial.pdf

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2. Regulatory Disclosures and Disclaimer

Equifax Australasia Credit Ratings Pty Ltd (Equifax Credit Ratings) is a credit rating agency regulated by the
Reserve Bank of New Zealand. The licensing regime addresses a range of matters including the quality and
integrity of the ratings process, independence and avoidance of conflict of interest, and responsibilities to
the public, clients and assessed entities. The regime also covers confidentiality, communication and
disclosure, professional development, document management, and a range of governance related matters.
Financial, operational and compliance audits are conducted by external, independent auditors each year.

Equifax Credit Ratings also holds an Australian Financial Services License (AFS License no. 341391) which
licenses it to provide credit ratings to wholesale clients in Australia.

The credit rating issued by Equifax Credit Ratings reflects our current opinion of the relative credit risk of
the institution. This opinion has been formed in accordance with Equifax’s published credit ratings
methodology - financial institution rating criteria (version 7, 2020).
https://www.corporatescorecard.co.nz/docs/RatingMethodologyFinancial.pdf

The credit rating and associated assessments, opinions and observations are solely statements of opinion.
They are not statements of fact. They do not constitute advice or a recommendation. The credit rating does
not guarantee the performance of the rated issuer or relevant security, and should not be relied on for the
purposes of making an investment decision. All information used in the credit rating process is obtained by
Equifax from sources believed by it to be accurate and reliable. Equifax adopts all necessary measures so
the information used in assigning a credit rating is of sufficient quality and from sources believed to be
reliable including, when appropriate, independent third-party sources. However, because of the existence
of human or system error, or other factors, all information contained herein is provided ‘as is’ without
warranty of any kind. Equifax is not an auditor and cannot in every instance independently verify or validate
information received in the rating process. Use of information contained in this report is at the recipients
own risk. To the extent permitted by law, Equifax, its directors, officers, employees and any persons
associated with the preparation of the release and our full report are not liable to any person in respect of
anything (or the consequences of anything) done or omitted to be done by any person in reliance on any of
the contents of the release or our full report; and are not responsible for any errors or omissions in the
release or our full report resulting from any inaccuracy, mis-description or incompleteness of the
information provided or from assumptions made or opinions reached by the parties providing the
Information. All information contained herein is protected by law, including but not limited to copyright law,
and this information may not be copied or otherwise reproduced, repackaged, further transmitted,

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transferred, disseminated, redistributed or resold, or stored for subsequent use for any such purpose, in
whole or in part, in any form or manner or by any means whatsoever, by any person without Equifax’s prior
written consent.

For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial
Services License of Equifax Australasia Credit Ratings Pty Ltd [AFSL #341391]. This document is intended to
be provided only to ‘wholesale clients’ within the meaning provided by the Corporations Act 2001. By
continuing to access this document from within Australia, you represent to Equifax that you are, or are
accessing the document as a representative of, a ‘wholesale client’ and that neither you nor the entity you
represent will directly or indirectly disseminate this document or its contents to ‘retail clients’ within the
meaning of the Corporations Act 2001. Equifax’s credit rating is an opinion as to the creditworthiness of an
issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It
would be inappropriate for ‘retail clients’ to make any investment decision based on Equifax’s credit rating,
and Equifax recommends you consult with your financial or other professional adviser.

Please refer to http://corporatescorecard.com.au/services_credit_ratings.php for further information and
additional regulatory disclosures, including our code of conduct, published ratings, criteria and
methodologies.