Jaja Finance's Losses Surge Amidst Debt Uncertainty
Jaja Finance, the company behind Asda's credit card, has reported a significant increase in impairment charges and losses, raising concerns about its financial health. The company's auditors have cast doubt on its ability to continue operating due to debt restructuring uncertainty.
Jaja Finance's impairment charges more than doubled to £39.5m in 2024, partly due to a change in provision methodology for customer defaults. This increase comes despite the company reporting a 50% rise in total income to £51m. However, total losses grew by 8.5% to £41.5m during the same period. The company's cashflow forecasts are highly sensitive and dependent on estimates of future customers' payment defaults, adding to the uncertainty.
Founded in 2015, Jaja Finance began offering credit cards on behalf of Asda in 2022 after being acquired by the Issa brothers and TDR Capital. The company's parent, Ray Fintech, formerly known as Phantom Investments, has faced criticism from MPs and recently changed its name. Earlier this year, the parent arranged a £100m debt facility at a 15% interest rate to defer cash interest payments. Despite this, no financial institution is currently in a materially uncertain situation or has disclosed not having completed new debt restructuring, according to available public information.
Jaja Finance's impairment assessment of its subsidiary investments incorporates significant management judgement and estimation uncertainty. The company hopes to complete its new debt securitisation as soon as October, with a non-binding letter of support from shareholders. However, the company has warned of 'material uncertainty' over its ability to continue as a going concern, raising concerns about its future prospects.
