New direct Lending fund targeting 6.5% yield seeks fresh capital raise

By Daniel Lanyon on Thursday 4 May 2017

Alternative Lending

The recently launched Alternative Credit investment trust RM Secured Direct Lending, says demand for its loans are strong.

The recently launched Alternative Credit investment trust RM Secured Direct Lending says demand for its loans are strong. 

The Edinburgh-based RM Secured Direct Lending trust is seeking to raise fresh capital just five months after its launch as it nears full deployment of its capital.

Launched back in December 2016, the closed-ended fund targets the SME lending space investing in loans it originates of between £2-10m. It specialises in secured debt investments and the portfolio has had a good run since its initial public offering (IPO) with most of its capital invested or moving towards deployment.  

Total Net Assets are today £48.9m. Nearly £40m has been invested in a total of 11 loans, with borrowers ranging from a healthcare group, a UK high street retailer and a large UK/European forecourt provider.

James Robson, manager of the fund, says a fresh injection of capital will help the portfolio's existing pipeline mature.

“The reason we want to raise more money now is the type of business we run is a very much a momentum-led business and it takes time to develop a pipeline of opportunities,” he said.

“Most of the transactions that we invest in take time to negotiate and time to due diligence. Therefore, it makes a lot of sense to continue to 'fill the hopper' rather than deploy and spend every last penny before you then start looking to raise more capital.”

“When you see your money whittling down it makes sense to continue the process of originating new transaction and continuing the dialogue with potential borrowers.”

The current yield on its loan book is nearly 7.70 per cent, and the firm expects this rising to 8.13 per cent when fully drawn with a weighted-average life of 3.46 years.

Based on the current portfolio, the firm expects to achieve its stated annualised dividend yield target of 4 per cent based on the IPO price) in its first year, rising to 6.5 per cent per year thereafter for the year to 31 December 2018.

Robson, who is also chief investment officer of RM Capital Markets, says there is “significant demand” from businesses of varying sizes, and across multiple sectors to access funding.

“Momentum is building all the time for new is very much a question of going to the market and seeing what the appetite is and seeing what the pipeline of opportunity.”

“New opportunities comes in day by day and other red flags come up for existing opportunities from due diligence.”

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