CEO Geoff Miller has resigned from GLI Finance with immediate effect.
Miller, who has steered the GLI ship for the past several years, will be succeeded by Andrew Whelan. Whelan, who was formerly Director of Lending at GLI, will now play the role of interim CEO whilst GLI tracks down a permanent replacement for Miller. Whelan previously held the post of CEO at Channel Island lending platform Sancus – a linkage which is important in deciphering the GLI shake up.
Mr. Miller leaves amidst uncertainty over capital raising. GLI announced on 3 December 2015 that it was sizing up a Placing and Open Offer of “2020 ZDP Shares”. The GLI board has opted not to proceed with the issue, nor will it be progressing with the issue of Convertible Unsecured Loan Stock (CULS) – which had also been proposed on 3 December.
But the fact remains that GLI requires capital – not only to accelerate loan growth amongst its 19 portfolio platforms, but also to pay off a £30m loan facility that was extended to the company by Sancus back in October 2014. GLI drew down £10m when the deal was first announced, with the option of accessing a further £20m down the line. £24.9m is now owed to Sancus, at an interest rate of 11% per annum. In light of the cancellation of the ZDP issue, GLI has considered exercising the option of extending the repayment date on this facility to March 2017. The Board considers this to be both an inefficient and expensive approach, preferring to “substantially repay” the Sancus loan facility, thereby reducing the company’s cost of capital. But where’s the cash going to come from?
Enter Somerston – a privately owned group of companies that is headquartered in Jersey, with close ties to Sancus. Somerston, via Golf Investment Limited (a newly formed SPV), has entered into a “binding agreement” with GLI, in which the former will subscribe for 15m new ordinary shares at 37 pence per share. These shares – which will rank pari passu with all existing ordinary shares – are expected to be admitted to AIM at 8.00am on 31 December 2015.
GLI Finance carries an estimated NAV of 53.0 pence per share, meaning that the Somerston issue will result in the dilution of the company’s existing investors – a nominal NAV dilution of “approximately 2%”, according to GLI.
Golf Investments Limited has also agreed indicative terms with the GLI board – which are subject to shareholder approval – to acquire another 32m ordinary shares. These extra shares, if issued, will be split into three chunks; 10m at 40 pence per share, 10m at 45 pence per share, and a final 12m at 55 pence per share. The GLI announcement asserts that the resulting dilution of these issues – were they to materialise – would be “offset by the advantages” of a strategic relationship with Somerston.
Somerston’s intervention appears to have served as something of the impetus behind Miller’s resignation. GLI will move forwards with a dual focus on reducing cost of capital and providing greater support to a number of its rapidly growing portfolio platforms (the likes of LiftForward and The Credit Junction spring to mind).
The broader issue here pertains to accessing capital. Industry observers regularly cite the “wall of money” faced by alternative finance platforms, but that money is rather more selective than is often implied. A huge amount of institutional capital is vying for the business of the world’s major platforms – not so for the more nascent bunch. GLI serves exactly this portion of the market, and the present state of affairs seems to me to aptly reflect the difficultly of doing so.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.