LONDON (Alliance News) - GLI Finance Ltd on Tuesday said it has agreed to acquire an online peer-to-peer lending platform in which it is already invested, FundingKnight Holdings Ltd, after the firm was placed into administration, despite GLI planning to exit the business earlier this year.
GLI invests in a broad range of alternative finance platforms so it can lend funds to small and medium sized businesses, giving them access to finance outside of traditional banks, and the company launched a strategic review last year to try to resolve some conflicts of interests and to evaluate the best way to deliver value for shareholders.
In February, GLI said it had failed to reach an agreement with FundingKnight about how to progress the relationship between the two firms, stating it no longer felt confident in deploying further resources to FundingKnight.
GLI agreed on an "amicable process for separation" with FundingKnight, which led to GLI becoming a "passive investor" in the business, reducing overall financial exposure whilst it organised a "long term exit."
That left GLI with a 23.4% interest in FundingKnight with a carrying value of GBP2.5 million alongside an additional GBP1.0 million investment in FundingKnight's preference share capital. GLI also is owed GBP290,000 worth of interest from FundingKnight, accrued against GBP525,000 worth of loans provided by GLI to FundingKnight.
FundingKnight had administrators appointed on Tuesday, and GLI Finance has pounced. It has agreed to acquire FundingKnight in its entirety, including the operating subsidiary Funding Knight Ltd and other subsidiaries Funding Knight Services Ltd and Funding Knight Corporate Services Ltd.
In the financial year that ended in March, FundingKnight posted a loss after tax of GBP1.2 million on revenue of GBP610,000. The business had net assets totalling GBP130,000 at the end of that year.
GLI will pay GBP750,000 in cash but has also pledged to provide at least GBP1.0 million of further capital to FundingKnight to keep its operations going.
Importantly, GLI said 60% of that consideration, equal to GBP450,000, will be applied by the administrators as partial settlement for GLI's loan provided to FundingKnight.
GLI said all of its other interests in FundingKnight will be written down to nil on the balance sheet as part of the acquisition.
"We believe FundingKnight is a fundamentally good business with strategic value. By acquiring the business at a low entry price, we will help secure the continued employment of the FundingKnight team and provide reassurance to the investors in FundingKnight loans and FundingKnight's SME client base that have existing loans or are seeking to borrow," said Chief Executive Andy Whelan.
"In the medium term, we will be seeking to maximise the potential of FundingKnight in a way which is consistent with our strategic plans," he added.
GLI shares were down 2.6% to 21.79 pence per share on Tuesday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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