Solvar (ASX:SVR) Announces NZ Loan Book Sale and Special Dividend

Specialist finance provider Solvar Limited (ASX:SVR), in a recent ASX announcement, has achieved a significant milestone in its New Zealand market exit by selling its arrears loan book for NZ$8.0 million. The deal includes potential additional consideration of NZ$1.4 million based on portfolio performance over the next 36 months. The Solvar NZ loan book sale demonstrates management’s capability to extract substantial value from a non-performing asset that carried a written-down book value of zero dollars on the company’s balance sheet.

The transaction delivers immediate shareholder returns through a 2.5 cents per share fully franked special dividend payable on 29 January 2026. Settlement of the sale is expected in December 2025, enabling the Board to distribute proceeds promptly whilst accelerating Solvar’s complete withdrawal from New Zealand operations. This strategic repositioning allows the company to concentrate resources on its dominant Australian market position in used-vehicle finance.

Transaction Structure and Financial Details

The sale comprises a base payment of NZ$8.0 million with performance-based upside potential, creating substantial value from an asset previously valued at zero. This outcome reflects effective asset management and demonstrates the company’s ability to monetise challenging portfolios.

The transaction represents pure value creation given the arrears book’s zero carrying value. Settlement is expected in December 2025, allowing the Board to distribute proceeds immediately to shareholders through the fully franked special dividend mechanism.

Managing Director and Chief Executive Officer Scott Baldwin emphasised the strategic significance: “The sale is an excellent outcome for the Group as we have monetised an asset that has a written down balance sheet value of zero dollars and we have accelerated our exit from the New Zealand market.”

What does the Solvar NZ loan book sale mean for shareholders?

This strategic divestment delivers multiple benefits to shareholders beyond the immediate cash proceeds. The transaction provides both a direct financial return through special dividends and strategic clarity around future capital allocation priorities.

Shareholders will receive a 2.5 cents per share fully franked special dividend on 29 January 2026, representing approximately 1.32% of the current market capitalisation based on the company’s 189,935,561 shares on issue. However, the value extends beyond the cash payment through attached franking credits that provide additional tax benefits.

Furthermore, the Board confirmed that additional special dividends are anticipated as Solvar collects its remaining New Zealand active loan book. These future payments will also be fully franked and paid in addition to the company’s ordinary dividend stream, creating multiple income sources for investors.

The strategic shift to prioritising special dividends over share buybacks maximises the utility of Solvar’s accumulated franking credits, which represent significant shareholder value that would otherwise remain unutilised.

How will the special dividend be paid?

Solvar’s Board approved a 2.5 cents per share fully franked special dividend as an immediate return of capital from the New Zealand arrears book sale proceeds. Special dividends differ from ordinary dividends as they represent one-time distributions tied to specific transactions rather than recurring operational earnings.

The payment scheduled for 29 January 2026 provides eligible shareholders with both cash returns and valuable franking credits. The fully franked status delivers additional value to Australian resident shareholders through attached franking credits, which represent company tax already paid at the 30% corporate rate and can offset personal tax liabilities or be refunded in certain circumstances.

The Board signalled this payment represents the first of multiple special dividends anticipated as the company collects its remaining New Zealand active loan book. This investor update demonstrates a commitment to maximising shareholder returns through tax-efficient distributions.

Why is Solvar exiting the New Zealand market?

The sale of the New Zealand loan book accelerates the company’s planned withdrawal from New Zealand operations, forming part of a broader portfolio rationalisation strategy that concentrates resources on core Australian market activities. This strategic repositioning reflects management’s assessment of optimal capital allocation and operational focus areas.

Solvar’s New Zealand business comprised the arrears loan book now sold and a remaining active loan book currently being collected. The arrears book’s zero carrying value indicates historical challenges with portfolio performance, making the monetisation outcome particularly noteworthy.

Geographic simplification through the New Zealand exit reduces operational complexity and allows capital and management to focus on higher-return opportunities in Australia. Solvar holds a dominant position in the Australian used-vehicle finance market, having funded over $3 billion in vehicles and personal loans across more than 20 years of operations.

Strategic benefits from the New Zealand exit:

• Operational focus: Concentrate resources on dominant Australian market position.
• Capital efficiency: Redeploy resources to higher-return opportunities.
• Risk reduction: Exit non-core arrears management business.
• Regulatory simplification: Single-country operational footprint.

What Changes Has Solvar Made to Its Capital Management Strategy?

Solvar’s Board announced a fundamental shift in its capital management strategy, moving away from share buybacks towards special dividend payments to maximise the value of accumulated franking credits. This pivot reflects management’s assessment that dividend distributions deliver superior shareholder value compared to share repurchases in the current context.

The company confirmed future special dividends will align with the collection of its remaining New Zealand active loan book, providing shareholders with a predictable timeline for additional capital returns. The Board noted being “mindful of the company’s pool of franking credits” when structuring this new approach.

These anticipated special dividends will be fully franked and paid in addition to Solvar’s continuing ordinary fully franked dividend programme. The Board confirmed the existing share buyback programme will not be renewed, shifting the focus entirely to dividend distributions.

This strategic pivot demonstrates a clear prioritisation of immediate, tax-efficient shareholder returns.

Understanding Franking Credits and Their Value

Franking credits are central to understanding the investment significance of the Solvar NZ loan book sale and the company’s evolving capital management strategy. These credits represent tax already paid by the company and provide additional value to shareholders beyond the cash dividend amount.

Franking credits, or imputation credits, represent corporate tax already paid on company profits. When Solvar pays the 30% Australian corporate tax rate and subsequently distributes dividends, franking credits attach to those payments. This mechanism prevents the double taxation of income.

A fully franked dividend of 2.5 cents carries 1.07 cents in franking credits. Australian resident shareholders include both the dividend and franking credit as assessable income, with the franking credit then offsetting their personal tax liability. For shareholders with tax rates below 30%, excess franking credits may be refunded by the Australian Taxation Office, making them a particularly valuable component of shareholder returns.

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