windywendy:

Hey Easimoni and Wanaj0, are you investing? If yes, can you tell us what you like about the company? I'm still open to investing if I find a compelling reason to

Planning to invest. Hope to still bump one or two questions to the CEO.

For me, main proposition is the fact that they are the first to start so will have an advantage.

For the competition, my understanding is that it is being promoted by UBA. If that is the case the bureau is not that independent. Accenture is just a consultant to them and nothing more. Personally, anything that involves UBA (Tony/Hakeem), I try to avoid it.

There is nothing that says in a place like Nigeria that we cannot have more than two bureaus.

Yes it is risky (every start up business is). But it worth the risk with the banks that have subscribed to them.

Will invest the minimum which is like the maximum that I can afford to lose.

It is not a capital intensive venture. It is driven by technology so roll out and expenasion should not be an issue.

maybe people could reduce their exposures by co-investing with different people,

e.g easimoni and tmoni can subscribe jointly (to be worked out later) and we take it as a vey big gamble

then hopefully pray it works out,
how possible is this?
@windywendy, very spot on analysis

This is the response of CEO Taiye Ayedun to Windywendy's post. This was posted on NVS: http://www.nigeriavillagesquare.com/board/money-talk/38349-banks-float-nigeria-s-first-credit-bureau-2.html

Dear Villagers:

My name is Taiwo Ayedun and I am the founder of CreditRegistry Corporation (incorporated in the State of Washington in December 2001) and also the founder of CR Services Limited in Nigeria (incorporated in January 2003).

I was invited by Big-K to address some questions about our company’s prospects in Nigeria given our recent private placement to raise money to enable us increase operational capacity to serve our customers.

I founded CreditRegistry because I am fascinated by the easy access to consumer credit in the US, which enables me (and millions of other US resident families) to enjoy a quality lifestyle. It also turns out that consumer credit stimulates economic expansion and wealth creation – consumer and mortgage credit spending account for over 67% of US GDP and are key drivers of US economic growth (http://www.ftc.gov/bcp/workshops/inf, nts/cate02.pdf).

CreditRegistry is very keen to help to replicate the US economic model in Nigeria. Weak protection for lenders, weak law enforcement skills and resources, lack of reliable identification and prospects of identity theft and fraud, all collaborate to limit access to consumer credit in Nigeria. Reliable credit information can help to address some of these problems. However, traditional credit bureau solutions will fail in Nigeria, as identity theft is increasing even in developed markets with better law enforcement resources (http://www.msnbc.msn.com/id/5800052/). This is why we created CreditRegistry, Nigeria’s first private credit bureau, and the world’s first credit bureau service with integrated biometrics. We believe that reliable consumer identification, along with other key services, will help to stimulate consumer lending in Nigeria. For those resident in Nigeria there is already evidence that banks are keen to lend to consumers – they just need some help with managing risk…

With regard to the post by Lymbic3 from Windywendy please let me address certain issues that were raised. Windywendy/Lymbic3's comments are in bold and my responses are indented.

What is unclear however is whether or not [biometrics] is a sustainable competitive advantage.

There is no direct plan by CreditRegistry to utilize biometrics as a “sustainable” advantage although we wouldn’t mind if that happens. Instead, our use of biometrics is to solve real and present problems that could prevent wide availability of consumer credit for ordinary Nigerians. This would give us an initial competitive advantage and enable us to reach critical mass much more quickly.

Their projections seem unrealistic. So far they claim to have information on about 500k individuals and corporates (sic) in their database and yet they're projecting to issue at least 900k credit reports among their 15 bank clients in the very near future.

On average each of these 15 banks has about 200 branches nation-wide. So 900,000 reports in FY09 (2 years away) is an average of about 1.15 loans per branch per day (assuming 5*52 working days in the year). This isn’t that far-fetched. But of course there are other sources of loans that we didn’t put in our projections…

I guess I'm not comfortable about the fact that they've made no mention of how they intend to populate the data base with enough info that banks will actually find useful and want to use.

We solved the process of credit data upload since data upload first began with three Nigerian banks in December 2003. There was a hiatus during the bank recapitalization period and now that banks are sorting out their IT/software issues as a result of disparate systems from the different merged banks the process of data upload has resumed. Unfortunately we did not think that it was necessary to provide all the technical details in the prospectus.

The whole connection between CR Services Nigeria and their USA counterpart and technical partner is just a smoke screen. It's basically a one-man show, with the main shareholder of the Nigerian subsidiary also being the owner of the US parent.

It is not unusual for a key entrepreneur to be the dominant or visible personality in a young organization. However, this does not mean that there are no other important people behind the scenes. The CreditRegistry team is comprised of individuals with several decades of management and technology leadership experience gained at the world's leading corporations, including Microsoft, Intel, HP, Deutsche Bank, Citibank, Natwest Markets, and the US Overseas Private Investment Corporation (OPIC).

Out of about 52 million shares that would be outstanding following our recent private placement I would directly own less than 1.5 million shares or 3% – that can hardly be called “main shareholder”. However, the US company (which has several shareholders, including myself) will own about 20% of the company; my indirect ownership in this case would be over 10% of the Nigerian company. In total this still leaves about 85% of the Nigerian company in the hands of other investors. Nonetheless, I don’t consider it a crime if I owned a much larger share of either company.

Moreover, the US parent has been in operation for sometime here and I couldn't find anything spectacular about the company's products or services.

The US Company does not provide services in the US market – only technology development takes place in the US. The US Company’s first market of operation is in Nigeria, which had been slow to take off since we were entering a market without a prior culture of sharing credit information. Believe me, it’s been quite a difficult task. But thanks to a variety of factors, not least of which was the CBN-initiated banking recapitalization, Nigerian banks are exploring ways to increase shareholder ROI and this means that they cannot ignore the consumer market.

Also, the so-called parent company takes a % of the turnover of the Nigerian subsidiary, takes a % of profits and in addition charges technical services fees! That's not cool, especially since it's just a start up and one person owns both companies. Doesn't sound like good business sense to me.

Royalty, technical licensing, and technical management fees or a combination thereof are customary ways in which the owner of the credit bureau technology earns revenue. Experian, Trans Union, and Equifax all invariably do this when they license their credit bureau technologies for use in other markets. And this is one way for shareholders of CreditRegistry Corporation USA to earn ROI.

There are other competitors, like the one mentioned above, with deeper pockets. The story in the link posted by JoshO above is true. I'm aware that accenture, which is more global and more technologically savvy and has deeper pockets than CR services is involved in one of the credit bureaus. When I was in Nigeria in December, I also gathered that IFC was partnering with the same credit bureau that accenture is involved with. And just as the story states, the other banks mentioned are promoters

This is like saying that no one should dare compete with an established company with deeper pockets. Or that one shouldn't innovate or improve upon an existing technology for fear of the established players. If that were the case we wouldn’t have competition at all - there’d be no Google or Yahoo! or even Microsoft. And we wouldn't have any other credit bureaus besides the first credit bureau to be established.

The shares being offered are preferred shares and there's no mention of what will happen to holders of those shares in the event of a stock market listing. Will the shares be converted to ordinary shares? I"m not too keen on buying preference shares, especially when they're class B and are not convertible to ordinary shares, and most especially when the holder of the Class A preference shares is also the owner of the company! It's like the guy has just taken measures to protech (sic) himself in the event that things don't work out -- Class A preferred shares, share of turnover, share of profits and technical service fees. I'm not impressed with this structure at all.

The preceding analysis of our shareholding structure is inaccurate and this is unfortunate. It would have been better to contact IBTC (the issuing house) or me for further explanation if the writer had questions since our contact information were on the placement memorandum. It is misleading to post an analysis that is based on an incomplete understanding.

Having said that, a stock market listing of CR Services’ shares is, at best, a medium term possibility. Thus, new investors (having about 75%) will have ample opportunity to initiate amendments of the company’s articles at the time when a stock market listing is contemplated. Please note that the more important points are that (a) the conversion of preference shares under such circumstances IS NOT prohibited under the company’s Memorandum and Articles of Association; the silence of the document on the issue is understandably because a stock market listing is not immediately contemplated; and (b) new investors who will be holding Class B Preference Shares will have the same voting rights as the existing shareholders.

Class A (US investors) and Class B preference shares (new investors) are in the same class type except that US investors paid N18.70 and new investors are paying a discounted price of N16.50. In the case of dissolution shareholders of preference shares receive double their investment before ordinary shareholders are paid from the company’s liquidated assets; this is stated clearly in the placement memorandum.

And the owners of Class A Preference Shares are NOT the sole owner of the company – they are the founder of the Nigerian company but will retain about 20% of the Nigerian company after the private placement and co-own it with the new investors.

Based on the cashflow and balance sheet projections, it doesn't look like this company has plans to invest in fixed assets over the next 4 years. Infact, they plan to invest more in current assets (debtors and prepayments) than in fixed assets. This makes me wonder if they have plans to expand. I would think their business model would necessitate the need to continously update their architecture as technological advances are made and clients' demand increases, and that they would need to expand in order to service more clients across the nation. 4 years seems like a long time not to make any fixed asset investments.

CreditRegistry Corporation handles enhancements and technology inventions within the licensing agreement with the Nigerian company.

For faster response please email me at taiwoa@creditregistry.com if you have more questions.

If you’re still interested in investing please contact the following people in Nigeria:

IBTC Chartered Bank Plc
Oyinda Akinyemi
Tel: 01 2626520/2712400 Ext 1186
Email: Oyinda.Akinyemi@ibtc.com

Yewande Sadiku
Tel: 01 2626520/2712400 Ext 1127
Email: Yewande.Sadiku@ibtc.com

CR Services Limited
Taiwo Ayedun
Tel: 01 7769587/8184775
Email: taiwoa@creditregistry.com

Best regards!

Taiwo Ayedun

Whao, I'm impressed that the founder of the company took time out of his (what I must imagine is a very busy) schedule to address the issues raised. That's very impressive.

From his responses, It's obvious that I was armed with incomplete while I was doing some of my analysis, and therefore made some wrong conclusions. However I got all of the information from the placement memo and didn't think that I had to go back to IBTC to get clarification. Anyway, based on the explanations, I feel more comfortable about the projections. Also, thanks to Taiwo for throwing more light on what would happen to the Class B pref. shareholders in the event of a listing --  though, it would have been very helpful if this was stated in the placement memo. I also didn't know that class A and B pref. shareholders are in the same class. My apologies to all who might have been misled by those aspects of my analysis  

What I would really like to know is the position of the preference share holders relative to the existing ordinary share holders. Would they have voting reights etc.

does anybody have any update on CR Services Limited? is this company in existence? does it have a website? who are clients currently using them?

They're very much around,

I'm not authorized to speak on their behalf.

Their Site - www.creditregistry.com or CLICK HERE

frankiriri:

What I would really like to know is the position of the preference share holders relative to the existing ordinary share holders. Would they have voting reights etc.

the rights of the preference shareholders in CR Services is basically the same as what an ordinary shareholder would eventually have when the company becomes public (voting rights etc). what i think CR Services floaters and their IBTC advisers were trying to do is protect their founders' shares because they were expecting strong people with clout, money and connection to buy into the placement, i mean people strong enough to run the company or oust these founders in future if need be. so they called it class B preference shares which means they are not in the same class as the founders shares.

i expect there is a lot of money to be made for the preference shareholders when the company is listed because they put a fairly steep barrier to entry and they have to reward everybody for their patience and faith etc in the coy

pls i would love a copy of the memo, here is my mail add nwaodua@yahoo.com

.

i received a letter from Cr Services earlier in the year saying the private placement was over-subcribed by about 110% or so.