By Daniel Lanyon on 6th August 2019
A capital raise will enable the digital micro-lender to satisfy outstanding liabilities and re-launch consumer lending.
Investment trust VPC Speciality Lending has amended its credit facility with lending platform Oakam following its exit from being put into administration earlier this year.
According to its 30 April factsheet, the loan Oakam represented 4.2 per cent of VPC Speciality Lending’s net assets of £299m.
Oakam, a UK-based digital micro-lender, has raised £6m to satisfy creditors following it exiting administration on 28 June 2019. The new cash will also support the company's borrowing base and provide growth capital.
Analysts at Numis said that it is positive to see Oakam exit administration, resume new lending and for additional equity funding to be provided to the business.
“We understand that the new terms leave the interest rate unchanged around Libor +12% with a maturity in March 2020. The payments on the VSL loan are current and repayments have been made during the administration process. The injection of equity reduces the LTV on the loan, which we understand is c.50 per cent.”
They add that it also highlights that the nature of balance sheet lending to fintech companies means that there is typically more risk around refinancing points.
“Lending at interest rates above 10% is not without risk, and VSL has experienced a number of issues with its platforms, including Borro (UK luxury pawnbroker) and Oakam which have both been through administration.”
“That said, VSL’s facilities are typically against a pool of loans and have a cushion of first loss protection provided by the originator, equivalent to an LTV of 80-85 per cent, as well as significant covenants”