Bond holders left in limbo with Just Cashflow facing "restructuring"
Just Cashflow has seen losses rise in recent years despite raising tens of millions of pounds from investors as a result of expected losses from its lending.
Alternative lender Just Cashflow's parent company JLG Group has been placed into administration, according to documents seen by AltFi, amid the lender experiencing financial difficulties that may mean some of its bondholders facing losses of up to 63 per cent.
The company, which lends money to UK SMEs, says in the document that it is experiencing ‘financial issues’ that means a number of its bonds can no longer be serviced and will therefore undergo restructuring with losses expected for investors.
In a letter to holders of the bonds, Just Cashflow is said to be unable to service a secured debenture dated 2021 and paying out an 8.75 per cent yield. The sum owed for the bond as at 30 June 2022 was £3,817,560 comprising £3,510,400 of principal plus £307,160 of interest.
Administrators note the financial performance of the company in recent years shows it has become increasingly loss-making.
“The financial statements for the year ended 31 December 2018 show that JCF incurred a net loss for the year of £2,200,000. For the following year end of 31 December 2019, JCFs net losses had increased to £3,100,000. The unaudited accounts for the year end of 31 December 2020 indicate expected losses of £22,100,000. The losses for the year end of 31 December 2020 have arisen as a consequence of expected losses in the loans made by JCF,” the letter said.
There are three reasons for Just Cashflow's situation outlined in the letter.
These are rising losses experienced in its core lending book owing to some borrowers facing economic headwinds as a result of the impact of the COVID-19 pandemic as well as Just Cashflow's operational cost base being too high creating an unsustainable ongoing business.
It is also alleged that Just Cashflow entered into a number of larger loans “outside of its core SME lending model including loans entered into with companies connected to former directors of the company”, although it says these directors have now left the business and been replaced with a new management team.
Just CashFlow did not respond to AltFi for comment.
This article has been updated to specify that Just Cashflow is not in administration but rather its parent company JLG is. 13.09.22