Pepper : enters into Scheme Implementation Deed with KKR

Key Points:

• Pepper has entered into a scheme implementation deed with Red Hot Australia

  Bidco Pty Ltd ("Bidco"), an entity

  owned by certain funds, clients or accounts

  managed or advised by KKR Credit Advisors (US) LLC or its affiliates, under which it is proposed that Bidco will acquire all the Pepper shares by way of a scheme of arrangement ("Scheme")1

• Pepper shareholders will receive a cash payment of $3.60 per share, representing a premium of 25.6% to the 1-month volume weighted average price of Pepper shares during the 1 month period leading up to and including 26 May 20172, or an equity

  alternative ("Scrip Option") which

  will enable Pepper

  shareholders to retain an

  interest in the Pepper business if they wish to do so

• In addition, under the scheme implementation deed, the Pepper Board is entitled to pay a fully franked interim dividend of up to 3 cents per share before implementation of the Scheme without this reducing the cash offer, or the consideration under the

  Scrip Option. share, subjec

  The Board intends to determine and pay a dividend of 3 cents per to compliance with all relevant laws and the operating performance

  and financial condition of the Company at the relevant time

• Pepper Directors unanimously recommend

  shareholders vote in

  favour of

  the

  Scheme, and each Director intends to vote all the Pepper shares held or controlled

  by them in favour of the Scheme, in each

  case in the absence

  of a Superior

  Proposal 3 and subject

  to an independent expert concluding (and continuing to

  conclude) that the Scheme is in the best interests of Pepper shareholders

• Pepper established an

  Independent Board

  Committee

  that has

  considered

  the

  transaction and, if applicable, will consider any Superior Proposal

• The Scheme

  meeting is

  expected

  to be held in early

  November

  2017, with

  the

  Scheme expected to complete later that month

• The Scheme

  is subject

  to various

  conditions

  including

  that eligible shareholders

  holding at least 35% of total shares4 elect to take one of the Election Options5

• Mr

Seumas

Dawes, Chairman of Pepper,

Mr Michael Culhane, Group

Chief

Executive Officer and Mr Cameron Small, Group Chief Financial Officer, and each of their respective affiliates, who together hold or control 35.5% of total shares have each indicated they intend to vote in favour of the Scheme, in the absence of the

Board recommending a

Superior Proposal and subject

to an independent expert

concluding (and continuing to conclude) that the Scheme is in the best interest of Pepper shareholders, and to take one of the Election Options

1 Except those subject to the Retention Option (described below)

2 The trading day prior to speculation in the media that Pepper may be the subject of a change of control transaction

3 As defined in the scheme implementation deed

1. Pepper shares on issue are expected to be approximately 184.06 million upon implementation of the Scheme. All references to

   percentages of shares are on the basis of this total number

2. "Election Options" means the Scrip Option or the Retention Option

   1

   Details:

   The Board of Pepper today announced that it has entered into a scheme implementation deed (the "SID") with Red Hot Australia Bidco Pty Ltd ("Bidco"), an entity owned by certain funds, clients or accounts managed or advised by KKR Credit Advisors (US) LLC or its

   affiliates

   ("KKR"), under which it is proposed that Bidco

   will acquire all of the Pepper

   shares6, by way of a scheme of arrangement (the "Scheme"). The full form of the SID accompanies this announcement.

   If the Scheme is implemented, Pepper shareholders not

   electing

   one of the Election

   Options will receive a cash payment of $3.60 per Pepper share ("Cash Consideration").

   The Scheme includes an equity alternative to the Cash

   Consideration ("Scrip Option")

   allowing shareholders (other than certain foreign ineligible shareholders) to instead receive one share in Red Hot Australia Holdco Pty Ltd ("Holdco"), which is the owner of 100% of the shares in Bidco, for each Pepper share they hold.7

   Commenting on the proposed transaction, Pepper Group Chairman, Seumas Dawes said "After careful consideration we believe this offer is consistent with the Board's efforts to deliver maximum value for shareholders. We believe it represents a compelling opportunity for shareholders, allowing them to choose to either obtain liquidity for their shares at an attractive valuation or remain invested in the Pepper business."

   Under the SID, the Pepper Board is also entitled to determine and pay to all shareholders a fully franked interim dividend in respect of the half year ended 30 June 2017 of up to 3

   cents per

   share on

   or before

   implementation of

   the Scheme. Such a dividend will not

   reduce the Cash Consideration of $3.60 per share under the Scheme or the amount of the scrip consideration under the Scrip Option. The Pepper Board intends to determine and pay an interim dividend of 3 cents per share, subject to compliance with relevant laws and the operating performance and financial condition of the Company at the relevant time.

   For Pepper shareholders, the Cash Consideration of $3.60 per share values Pepper's fully diluted equity8 at approximately $675.9 million and represents:

   • a premium of 25.6% to the 1-month volume weighted average price ("VWAP")9 of Pepper shares up to and including 26 May 2017 of $2.87 (26 May 2017 being the trading day prior

     to speculation

     in the media that

     Pepper may be the

     subject of

     a change

     of control

     transaction);

     • a premium of 29.1% to the 3-month VWAP up to and including 26 May 2017; and

     • a premium of 44.7% to the 12 month VWAP up to and including 26 May 2017.

     Alternatives to receiving Cash Consideration

     The default consideration under the Scheme is the Cash Consideration. However, subject

     to certain conditions, Pepper shareholders

     (other than certain foreign

     ineligible

3. Except those the subject of the Retention Option

4. Or alternatively to retain their Pepper shares by electing the Retention Option

5. Fully diluted equity includes the 184.06m Pepper shares on issue at Scheme implementation plus an additional 3.7m employee share

   rights

6. Volume weighted average price based on cumulative trading volume

   2

   shareholders) may instead elect the Scrip Option. Such an election must be in respect of all of their shares. The Scrip Option enables Pepper shareholders to retain an interest in the Pepper business if they wish to do so.

   In addition, any shareholders

   whose receipt of

   a Holdco

   share under the Scrip Option

   would otherwise result in a tax becoming payable without an equivalent of rollover relief

   under a foreign tax

   jurisdiction applicable to that shareholder or the relevant

   beneficial

   holder, will have the option

   of retaining their Pepper shares (the

   "Retention

   Option").

   Following

   implementation of

   the Scheme, Holdco will

   explore alternative

   means of

   acquiring

   those Pepper shares in a manner which has less adverse tax consequences

   including, potentially, some deferral of tax.10 The Retention Option is subject to:

   • a pro rata scale back if shareholders holding an aggregate of 9.9% or more of total shares elect this option, in which case Cash Consideration will be paid in respect of the excess shares; and

   • the possibility that retained Pepper shares may be compulsorily acquired by Bidco at any time in the 3 year period from the Implementation Date at their then fair market value if they have not otherwise been acquired by Holdco or its nominee.

     Scale back if maximum elections exceeded

     There will be a separate pro rata scale back

     if aggregate elections for the Election

     Options11 relate to more than 48.5% of total shares. If scaling back is required, electing

     shareholders will receive a reduced amount of

     Holdco shares and

     the balance of their

     Scheme

     consideration in cash. As

     a result,

     KKR will

     hold shares in Holdco on

     implementation of the Scheme equal to at least 51.5% of the total shares in Holdco. Minimum election condition

     It is also a condition of the Scheme that shareholders holding at least 35% of the total shares elect to take one of the Election Options.

     Mr Seumas Dawes, Chairman of Pepper (who controls 29.7% of total shares), Mr Michael

     Culhane,

     Global Chief Executive Officer (who controls 4.6% of total shares,

     excluding

     certain incentive shares in respect of which he does not currently have voting rights), and

     Mr Cameron Small, Global

     Chief Financial Officer (who controls 1.2% of total shares,

     excluding certain incentive shares in respect of which he does not currently have voting rights and certain shares in a trust of which he is a director but does not control the votes),

     have each indicated they or

     their respective affiliates (as

     applicable) intend

     to vote in

     favour of the Scheme, in the absence of the Board recommending a Superior Proposal

     and subject to an

     independent expert

     concluding (and continuing to

     conclude) that the

     Scheme

     is in the

     best interest of Pepper shareholders. Those individuals have further

     indicated that if the Scheme is approved they or their affiliates will elect the Scrip Option

     (in the case of Mr Culhane).

     Dawes and Mr Small) and the Retention Option

     (in the case of Mr

7. There can be no assurance that Holdco will be able to identify and / or implement such alternative means of Holdco acquiring Pepper shares subject to the Retention Option

8. Determined after the 9.9% Retention Option scale back referred to above, if applicable

3

Pepper shareholders that make one of the Election Options will become parties to a Shareholders Deed which is included as a schedule to the SID.

The Pepper Board unanimously recommends shareholders vote in favour of the Scheme at the Scheme meeting.

Each Director intends to vote all the Pepper shares held or controlled by them (including shares which may be received on exercise of options) in favour of the Scheme.

The Directors' recommendation and voting intentions as set out above are subject to no

Superior

Proposal

emerging

and an independent expert

concluding

(and continuing to

conclude) that the Scheme is in the best interests of Pepper shareholders.

Pepper shareholders should read the Scheme Booklet to be sent to all shareholders in September, and seek appropriate advice before deciding how to vote and whether to elect either of the Election Options.

The Scheme is subject to certain conditions that must be satisfied or waived for the Scheme to be implemented. These include that each counterparty to each of the Pepper Debt Facilities consents to the change of control arising from the implementation of the Scheme.12 In this regard, the Board notes that there is no assurance that the requisite consents will be obtained.

In addition, the Scheme is subject to a number of other conditions including shareholder approval, Court approval, no material adverse change or prescribed occurrences, as well as the approval of the Foreign Investment Review Board (FIRB) and certain other local and foreign regulatory bodies (including in Ireland, Korea and the UK).

Unless every condition to the Scheme implemented.

is satisfied or waived, the

Scheme will not be

KKR has advised Pepper that it expects the Scheme proposal to be fully funded by equity

financing

provided

by certain

funds, clients or

accounts

managed

or advised by KKR

Credit Advisors (US) LLC or its affiliates.

The SID

contains

customary exclusivity provisions including no

shop restrictions, a

notification obligation, no talk restrictions and a matching right, the latter two of which are

subject to Pepper

Directors'

fiduciary

obligations. The SID also details circumstances

under which a break fee may be payable to Bidco or any other person Bidco directs, or a reverse break fee payable to Pepper.

An Independent Board Committee (the "IBC") has been established and has considered

the transaction and, if applicable, will consider any Superior Proposal. Melanie Willis (Chair), Matthew Burlage and Des O'Shea.

The IBC comprises

Ms Willis

said: "We are pleased to present this transaction to shareholders for their

consideration. It

provides

the opportunity to

take cash at a

premium

for those

12 "Pepper Debt Facilities" means the existing corporate debt facilities of the Pepper Group as at the date of the SID and certain of the existing Pepper warehouse facilities as at the date of the SID.

4

shareholders who

desire certainty,

or the opportunity

to stay

invested

for those

shareholders who desire to support Pepper as it enters a new phase of possible growth which is expected to be capital intensive."

Ms Willis added: "Pepper undertook an extensive process to maximise shareholder value and evaluated numerous alternatives and proposals from a range of potential local and

global players. Potential bidders were

offered the opportunity to undertake limited due

diligence to firm up their respective offers. KKR was selected on the basis of it delivering the highest cash alternative to Pepper shareholders."

The IBC

engaged

its own financial and legal advisers to

assist it with its review of the

various transaction

proposals

that had

been received, and to assist the IBC

negotiate

transaction terms with KKR.

Pepper shareholders do not need to take any action at the present time.

A Scheme Booklet containing information relating to the Scheme, reasons for the

Directors'

unanimous recommendation, details

of the

Scheme

meeting

and the

Independent Expert's Report 2017.

is expected to be

sent to shareholders in late September

Shareholders will be given the opportunity to vote on the Scheme at a meeting which is expected to be held in early November 2017. Subject to shareholder approval and the

other conditions of the Scheme being satisfied, the implemented in November 2017.

Scheme

is expected to be

Pepper is

being advised by

Citigroup

and Jones Day.

The IBC is being advised by

Highbury Partnership and Herbert Smith Freehills.

ENDS

For further information please contact:

Analysts / Investors

Melinda Hofman Corporate Affairs Manager Pepper Group Limited

+612 9463 4675

+61 (0) 438 855 991

Media

Tim Allerton

City Public Relations

+612 9267 4511

+61 (0) 412 715 707

Pepper Group offers a unique, diversified, global portfolio of financial services including

Lending,

Advisory

and Asset

Servicing

across the residential and

commercial property

sectors - as well as in consumer, auto and equipment finance.

As a people focused lender, Pepper

specialises in flexible loan

solutions

based on

individual credit assessment. It enables us to support many borrowers who fall outside the credit criteria of the major banks. As a third party servicer, we administer loan books on behalf of other banks and financial institutions - when they don't have the capacity. We step in, using our own processes or expertise to administer loan payments or manage the arrears and recovery process.

Pepper is a global leader in alternative solutions with over 600,000 customers worldwide and $50.8 billion in assets under management as at 31 March 2017 - comprising $7.7 billion in lending assets and a servicing portfolio of $43.1 billion.

KKR is a leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, credit and, through its strategic partners, hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation with KKR portfolio companies. KKR invests its own capital alongside its partners' capital and provides financing solutions and investment

opportunities through its capital markets business.

References to KKR's investments may

include the activities of its sponsored funds. For additional information about KKR & Co.