17 Jan 2018 13:53
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES OR TO US PERSONS.
Guernsey, 17 January 2018
Funding Circle SME Income Fund Limited
(the "Company")
Transaction with Citibank, N.A. London Branch
The Board is pleased to announce that the Company has entered into a formal agreement with Citibank, N.A. London Branch ("Citibank London") to establish a funding transaction to make loans to UK small businesses through the Funding Circle platform. The transaction will serve to support the Company's target dividend yield of 6-7% per annum.
Under the terms of the agreement Citibank London will provide £50 million of funding into the transaction, by entering into a senior, floating rate loan. The Company will contribute a portfolio of existing UK small business loans at par, and in return shall receive approximately £50 million of cash to be deployed in accordance with its investment policy, and junior notes.
Richard Boleat, the Chairman of the Company, commented "we are very pleased to be able to complete this transaction on attractive terms with Citibank London, having received financing proposals from a number of parties. The senior facility will be fully drawn on closing of the transaction, and the Company's leverage ratio, on a "look through" basis, will be approximately 49%, consistent with the Board's approved leverage limit of 50%."
CONTACTS
Richard Boleat, Chairman
+44 (0) 1534 615 656
Richard.Boleat@fcincomefund.com
Secretary and Administrator Sanne Group (Guernsey) Limited FundingCircle@sannegroup.com +44 (0) 1481 739810
Media Contact
David de Koning
Natasha Jones
+44 (0) 20 3667 2245
press@fundingcircle.com
Corporate Broker
Numis Securities Limited
Nathan Brown / Harry Trueman
n.brown@numis.com / h.trueman@numis.com
+44 (0) 20 7260 1000
Investor Relations
ir@fcincomefund.com
Website
www.fcincomefund.com
The LEI number of the Company is 549300ZQIYQVNIZGOW60.
FURTHER INFORMATION
Capitalised terms used in this announcement shall have the meaning given to them in the Company's prospectus dated 6 February 2017 (the "Prospectus") (unless the context otherwise requires).
Transaction with Citibank London
In exercise of the Company's powers to make indirect investments, the Company has agreed to participate in a structured finance transaction (the "Transaction") with Citibank, N.A. London Branch. The Company is participating indirectly through its interest in the UK IrishCo Note, issued by IrishCo, which itself will subscribe for Class B junior notes ("Class B Notes") issued by a further Irish special purpose vehicle (the "Issuer") in a new structure into which Citibank London will provide £50,000,000 of senior finance.
Citibank London will advance a senior, floating rate loan of £50,000,000 (the "Senior Loan") to the Issuer. Subject to certain conditions precedent, the Senior Loan is expected to be drawn by way of a single advance following completion of the Transaction. Interest shall accrue on the Senior Loan at a floating rate equal to LIBOR (as defined in the agreement setting out terms of the Senior Loan (the "Senior Loan Agreement") plus a pre-determined spread) per annum, and is payable monthly. The advance made under the Senior Loan Agreement, to the extent not already pre-paid or repaid under the Senior Loan Agreement, shall be repaid in full in December 2026.
IrishCo has subscribed for Class B Notes, and may (subject to certain conditions and at its sole discretion) subscribe for further Class B Notes from time to time. Unless previously redeemed, purchased or cancelled, the Class B Notes shall be redeemed in full at their outstanding principal amount in December 2026.
The Company will be indirectly interested in all amounts received by IrishCo under the Class B Notes pursuant to the UK IrishCo Note issued by IrishCo to the Company, under which monthly payments (net of IrishCo's costs and expenses) are made to the Company in amounts equal to the gross revenues of IrishCo.
The Issuer was incorporated in the Republic of Ireland as a designated activity company limited by shares for the purpose of acquiring and investing in Credit Assets as described below. It is not an Affiliate of the Company.
Advances under the Senior Loan and the proceeds of the issue of the Class B Notes will be used by the Issuer to fund Credit Assets originated through the marketplace loan origination platform operated in the UK by Funding Circle UK (the "UK Platform") that satisfy certain concentration limits and eligibility criteria.
In approving the Company's and IrishCo's participation in this indirect investment, the Board and IrishCo have satisfied themselves that the terms of the Transaction are such that this indirect investment will not result in a breach, on a "look-through" basis, of the Investment Policy or any Portfolio Limits.
As this indirect investment in Credit Assets is to be made alongside a third party participant (Citibank London), the Investment Policy and any Portfolio Limits will be applied to the relevant indirect investments on a pro rata basis, proportionate to the Company's indirect interest in the underlying Credit Assets.
Whilst the borrowing or leverage by the Issuer does not count towards the borrowing limits applicable to the Company (as the Issuer is neither an Affiliate nor a Near Affiliate of the Company), the Board has required that such borrowing or leverage limits are applied indirectly. The Company will hold such principal amount of Class B Notes that maintains the aggregate borrowing or leverage of the Company on a "look-through" basis at below 50 per cent of net assets.
The risk and return profile of the Company's investment in (unlevered) Credit Assets will differ from that of the investment in the Class B Notes, which are levered.
Funding Circle Limited has not acted on behalf of the Company or IrishCo in respect of the arrangement or management of the Transaction, nor has it advised on the Transaction. Funding Circle will be acting solely in the capacity of servicer of those Credit Assets which are transferred from IrishCo to the Issuer and those which are funded by advances under the Senior Loan.
Further information relating to the Class B Notes and the rights and priorities between Citibank London and the holders of the Class B Notes is set out a supplementary prospectus relating to the Company which is supplemental to the Prospectus and which is expected to be issued following regulatory approval.
ABOUT FUNDING CIRCLE SME INCOME FUND
The Company is a registered closed-ended collective investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and the Registered Collective Investment Scheme Rules 2015 issued by the Guernsey Financial Services Commission ("GFSC'').
The Company's investment objective is to provide shareholders with a sustainable and attractive level of dividend income, primarily by way of investment in Credit Assets as defined in the Company's Prospectus.
IMPORTANT NOTICES
This announcement contains "forward-looking" statements, beliefs or opinions. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of the Company and all of which are based on its directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "projects", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events, assumptions or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the Board or the Company with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business concerning, amongst other things, the financial performance, liquidity, prospects, growth and strategies of the Company. These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this announcement. Nothing in this announcement is, or should be relied on as, a promise or representation as to the future. The Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules or the Disclosure Rules and Transparency Rules of the FCA. No statement in this announcement is intended as a forecast or profit estimate.
Neither this announcement nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) (the "United States"), or distributed, directly or indirectly, in the United States or to US Persons (as such term is defined in Regulation S under the US Securities Act of 1933, as amended (the "Securities Act"). Neither this announcement nor any copy of it may be taken or transmitted directly or indirectly into Australia, Canada, Japan or South Africa or to any persons in any of those jurisdictions, except in compliance with applicable securities laws. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian, Japanese or South African securities laws. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for securities in the United States, Australia, Canada, Japan or South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful.
Any securities mentioned in this announcement have not been and will not registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.
This announcement has been issued by and is the sole responsibility of the Company. Numis Securities Limited ("Numis") and its affiliates expressly disclaim any obligation or undertaking to update, review or revise any forward-looking statements contained in this announcement whether as a result of new information, future developments or otherwise.
Apart from the responsibilities and liabilities, if any, which may be imposed on Numis under a regulatory regime of any jurisdiction and where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, neither Numis nor any of its affiliates accepts any responsibility whatsoever for, or makes any representation or warranty, express or implied, as to the contents of this announcement or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company or any issue of securities mentioned in this announcement, nothing in this announcement will be relied upon as a promise or representation in this respect, whether or not to the past or future. Numis and its affiliates accordingly disclaims all and any responsibility or liability, whether arising in tort, contract or otherwise (save as referred to above) in respect of this announcement or any such statement.