ZIP Co (ASX: ZIP) Announces Major Funding Update to Expand Capacity and Reduce Costs

In a recent investor update, ZIP Co Limited (ASX: ZIP) has announced a significant funding and capital update designed to strengthen the digital financial services company’s operational capacity. The package delivers material improvements, including a notable ZIP Co funding capacity expansion, reduced borrowing costs, and enhanced financial flexibility. With a new US$283.4 million warehouse facility in the United States and improved funding costs in Australia, ZIP Co is positioned for sustained growth in the competitive buy-now-pay-later sector.

The funding initiatives represent a pivotal development in ZIP Co’s capital management, providing the company with expanded flexibility to capitalise on market opportunities. Furthermore, the company maintains US$348.4 million and A$344.3 million of undrawn headroom available in US and Australian markets respectively, demonstrating substantial capacity for future receivables growth. These moves underscore ZIP Co’s evolution from a growth-stage fintech to a mature financial services provider capable of accessing institutional capital markets on increasingly favourable terms.

New Warehouse Facility Enhances US Operations

A key component of the company’s growth plan is a sophisticated US$283.4 million warehouse facility established with two high-quality funding partners in the United States. This two-year facility represents a significant advancement in the company’s funding infrastructure, providing enhanced capacity for future business expansion whilst delivering material improvements in funding costs compared to existing arrangements. The facility is a cornerstone of the ZIP Co funding capacity expansion.

The warehouse facility operates as a revolving credit structure specifically designed to support ZIP Co’s receivables growth in the competitive US market. By partnering with established institutional funding providers, ZIP Co has secured more favourable terms whilst maintaining the operational flexibility needed to execute its growth initiatives across the American fintech landscape.

Key advantages of the new facility include:

• Enhanced capacity for immediate business expansion opportunities
• Material improvement in funding costs versus previous arrangements
• Diversification of ZIP Co’s overall funding programme
• Immediate availability for drawdown when growth opportunities arise
• Two-year term providing medium-term funding certainty

The facility’s structure allows ZIP Co to fund its buy-now-pay-later receivables more efficiently whilst reducing the company’s overall cost of capital. This warehouse facility complements ZIP Co’s existing US$300.0 million AR3 LLC facility, bringing total US funding capacity to US$583.4 million. The AR5 LLC facility matures in October 2027, providing a staggered maturity profile that reduces refinancing risk.

How Does ZIP Co’s Australian Funding Cost Improvement Impact Profitability?

In Australian capital markets, ZIP Co has achieved remarkable success by successfully pricing a new A$400 million rated note issuance within the Master Trust (2025-2) at a weighted average margin of just 1.37%. This pricing represents a substantial improvement from previous issuances and demonstrates the strengthening credit profile of ZIP Co’s business operations.

Funding Cost Improvement Timeline:

The dramatic improvement in funding costs reflects several positive developments within ZIP Co’s operations. The company’s consistent portfolio performance, enhanced risk management systems, and strong operational metrics have contributed to growing confidence amongst institutional investors. The November 2025 issuance attracted funding from a diversified mix of domestic and offshore investors, demonstrating broad market confidence in ZIP Co’s credit quality.

According to ZIP Co Group Chief Financial Officer Gordon Bell, “The attractive terms and pricing levels reflect the strength of our business and credit performance across the Group.” This improvement in funding costs directly translates to enhanced profitability and provides ZIP Co with a competitive advantage in pricing consumer credit products.

The A$400 million 2025-2 rated note issuance is expected to settle on 10 November 2025, with proceeds allocated to fund business growth and repay the existing 2023-2 facility. Following settlement, funding capacity is projected to increase by approximately $95 million. The 2023-2 facility, which has a limit of $285.0 million, will be called on 10 November 2025.

What Are the Key Metrics of ZIP Co’s Share Buyback Programme?

ZIP Co’s on-market share buyback programme demonstrates the company’s commitment to disciplined capital allocation and shareholder value creation. Under the $100 million programme, ZIP Co has purchased 21.4 million shares for total consideration of $58.4 million to date, representing an average price of approximately $2.73 per share.

Share Buyback Programme Metrics:

The buyback programme operates within ZIP Co’s broader capital management framework, allowing management to opportunistically repurchase shares when they trade below perceived intrinsic value. This approach serves multiple purposes including enhancing earnings per share through share count reduction, returning excess capital to shareholders efficiently, and demonstrating management confidence in the company’s future prospects.

The programme provides ZIP Co with flexibility to adjust its capital structure based on prevailing market conditions whilst maintaining adequate funding capacity for growth initiatives. The disciplined approach to capital allocation reinforces ZIP Co’s evolution as a mature financial services provider capable of balancing growth investments with shareholder returns.

With 1,233,155,283 shares on issue as at 6 November 2025 and a market capitalisation of approximately $4.65 billion, the buyback represents a meaningful allocation of capital towards share count reduction. The remaining $41.6 million programme capacity provides ongoing flexibility for opportunistic purchases.

Diversified Funding Portfolio Provides Financial Flexibility

ZIP Co maintains a sophisticated funding infrastructure spanning multiple markets with substantial capacity headroom for expansion. The company’s diversified portfolio of funding facilities totals over $3.2 billion across US, Australian, and New Zealand markets, providing financial flexibility and reduced concentration risk. These initiatives are central to the ZIP Co funding capacity expansion.

Current Funding Capacity by Geographic Market:

The funding structure provides ZIP Co with several key advantages including geographic diversification across three key markets, multiple funding partners reducing concentration risk, varied maturity profiles providing refinancing flexibility, and different facility types optimised for specific business requirements.

ZIP Co’s Australian operations benefit from a well-developed funding infrastructure, with facilities including rated note series ranging from the 2023-2 through 2025-1 tranches, multiple Variable Funding Notes with varying maturity profiles, and the established 2017-1 Trust facility. This diversified structure provides operational flexibility whilst spreading refinancing risk across different time horizons.

The US operations utilise warehouse facilities through AR3 LLC and the newly established AR5 LLC, providing US$583.4 million in total capacity with US$348.4 million available for immediate deployment. The AR3 LLC facility has a limit of US$300.0 million with US$235.0 million drawn, maturing in December 2026. Meanwhile, New Zealand operations maintain a smaller but proportionate facility through the Zip NZ Trust 2021-1 with NZ$14.5 million of available capacity, maturing in July 2026.

Why Are Investors Increasingly Confident in ZIP Co’s Credit Performance?

ZIP Co’s ability to secure increasingly favourable funding terms reflects the company’s strengthening operational performance and credit quality across its portfolio. The improvement in funding costs from 2.13% in September 2024 to 1.37% in November 2025 represents a 76 basis point improvement that directly impacts profitability and competitive positioning, supporting ongoing efforts for ZIP Co funding capacity expansion.

Credit Performance Indicators:

• Consistent portfolio performance across receivables management
• Enhanced risk management systems and processes
• Diversified investor base including domestic and offshore participants
• Strong operational metrics supporting creditworthiness assessments
• Market confidence in ZIP Co’s business model execution

The company’s credit performance improvement stems from several operational enhancements implemented across the business. ZIP Co has invested substantially in risk management technology, refined underwriting processes, and enhanced portfolio monitoring capabilities. These improvements have resulted in more predictable cash flows and reduced credit losses, factors that institutional funding partners value highly.

This diversification, combined with the company’s scale advantages, provides a more stable foundation for its credit portfolio. For investors, this ASX announcement highlights a clear path toward improved profitability and reinforces the company’s evolution into a more mature and financially robust entity in the global fintech market.

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