VPC Specialty Lending Investments’ next share issuance programme is under way.
We first learned in July that VPC was planning to proceed with a C Share issue in September. That issue opened yesterday. The intention of the round is to raise proceeds of at least £200m, at a price of £1 per C Share. Through the publication of its prospectus, we also learn that the C Share raise marks the beginning of a 12 month programme that will see up to 500 million ordinary and/or C Shares issued.
VPC staged an IPO on the London Stock Exchange in March, raising £200m. That money has been deployed at an average rate of over $120m a month since the IPO. VPC announced that the proceeds of the listing had been fully deployed on 22nd July, well ahead of the company’s stated goal of achieving full deployment within 6 months of the float.
The seeking of a fresh injection of C Share capital comes in response to “a strong pipeline of investment opportunities across a range of specialty lending platforms”. VPC is seeing opportunities for greater capacity with existing platform partners, the chance to achieve increased diversification across geographies and product types, and the potential for new platform partnerships.
Beyond the C Share raise, as part of the company’s share issuance programme, VPC may issue up to a further 300 million shares over the course of the next 12 months. On the issue of dilution, VPC has assured its existing shareholders that their shares will not be diluted until at least 90% of the proceeds of the C Share raise have been deployed. At this time (or 9 months removed from the issue, depending on which comes first), the C Shares will be converted into ordinary shares. VPC expects to have fully invested the proceeds of the C Share issue within 6 months.
VPC’s strategy in many ways mirrors that of P2PGI, which was the first alternative finance focused Closed End Fund (CEF) to stage an IPO, way back in May 2014. P2PGI raised £250m in C Share capital towards the start of the year, and returned for a second C Share issue in July, raising £400m. The alternative finance sector’s original fund structure has raised £870m to date.
Returning to VPC, the company is targeting a net dividend of 8.0%, and a net total return in excess of 10.0% per annum after full investment. VPC announced its first dividend on 13th August 2015 of 0.9 pence per Ordinary Share, which was paid on 3rd September 2015, in respect of the period between the company’s successful IPO in March and the end of June. VPC intends to pay out dividends on a quarterly basis. The fund’s investors are able to access these returns tax-free. On July 1st, VPC Specialty Lending Investments – and indeed all marketplace-lending focused Closed End Fund vehicles – became eligible for ISA inclusion.
The CEF space is about to heat up even more, with the entry of new combatant GLI Finance imminent. The “GLI Alternative Finance PLC” fund will hit the London Stock Exchange on 23rd September.
VPC Specialty Lending Investments has a firm handle on second place within the CEF sector at present, having launched a fair while after P2PGI. The success of this latest C Share issue should serve as a good indicator as to whether the fund can mount a challenge on the top spot.