£2 billion milestone
Investec Asset Finance plc (“IAF”) has announced reaching £2 billion of total financing for equipment to UK businesses since its establishment eight years ago, marking a major milestone for the bank and its asset finance division.
The announcement follows the recent statement issued by the Bank of England showing that Investec Bank plc was the second largest net lender to SMEs in Q2 among banks using the government’s Funding for Lending scheme, providing net funding of £136 million to SMEs last quarter.
The £2 billion in lending has been aided by a £264 million securitisation deal, completed at the end of 2013. IAF sold bonds backed by £264 million worth of SME equipment leases to a range of leading institutional investors, the first of its kind in the UK. The securitisation deal included almost 36,000 finance leases and hire purchase contracts providing asset finance to UK SMEs . .read more...
Scottish Referendum and asset finance
19th September 2014 - Panic over!
This could be the article with the shortest ever shelf life. It may be rendered obsolete on the 19th September by the result of the Referendum. Or maybe not? Whatever, the Editor has asked me to comment on issues facing the asset finance industry following a majority ‘Yes’ vote [writes Bruce Wood, Partner, Morton Fraser LLP, Edinburgh].
The biggest issues are at regulatory level. UK financiers are subject to EU regulation with a UK overlay. The Tories are committed to an in/out EU referendum and may win the next election. You thus have a bewildering range of possibilities - both countries may be in or out of the EU; Scotland may be in while the rest of the UK may be out, or vice versa. Presumably, initially Scotland would simply copy existing UK financial regulation. Might we contract in to the FCA or set up our own equivalent?
Over time, though, things would doubtless diverge, particularly if one country were in the EU and the other weren’t - or even if both were in but chose different levels of gold-plating of EU rules. Scotland might seek a lighter touch to encourage finance companies to set up here in the same way as the Scottish Government has already suggested lowering corporation tax rates to stem the outflow of capital on independence and encourage new inflow.
Heads are being kept firmly down at present. You see little comment on specific industry plans, just vague talk of contingency plans. This does not mean the heads are so far down as to be in the sand. A ‘Yes’ vote will simply give rise to negotiations - a lot of negotiations - with the SNP planning for separation in 2016 but, in reality, it would surely be considerably later. There will be several years during which the planning can be done and implemented. But this will be against a backdrop of known uncertainty (remember Mr Rumsfeld’s “known unknowns”?) which is bound to unsettle the financial markets in relation to the UK as a whole.
One thing is certain: at the day-to-day transactional level . .read more...
Aldermore IPO expected shortly
Talk of imminent flotation plans valuing Aldermore at up to £900 million has started leaking into the press, though there is nothing from the bank itself as yet. For the asset finance industry it is heartening to read that the asset finance segment within Aldermore plays such a large role. Asset finance’s share of the total income of the bank is £24.5 million, or 23 percent, for the financial year ending 31st December 2013, while its segment profit contribution, that’s after its own direct expenses and bad debt provision, was £12.7 million, or 20 percent of bank’s profits at that level. Looks like leasing and asset finance pays off!read more...
Renaissance at BLME
Industry veteran Hugh Sigrist has launched Renaissance Asset Finance (“Renaissance”), a newly formed leasing company targeting the UK’s small ticket market. Renaissance will provide asset financing services to SMEs, as well as High Net Worth Individuals. BLME, an independent wholesale challenger bank and Renaissance’s key funder, is supporting its efforts to close the current SME funding gap by providing a financing line of £35 million. This makes Renaissance well placed to service the financing needs of the SME sector following the departure of large lenders from the market after the financial crisis.
Renaissance will operate through the UK’s premier brokers. Founder Sigrist, having been the managing director for 16-years of a highly successful brokerage, Reliance Financial Contracts, is well known across the UK broker market. More recently, he also developed a highly successful lending book, predominantly through broker introductions.
Hugh Sigrist, CEO and Founder of Renaissance Asset Finance, stated, “It is important that we have a real synergy with brokers, we want to really understand their client’s businesses in detail. We believe it is this that separates us from the many centralised system-driven underwriting approaches that exist. We want show that check-list financing is not sustainable and cannot cater to many companies financing requirements.
“Despite financing pressures on the SME market having eased a little over the last 12-18 months, small businesses continue to struggle to access finance. SMEs, let down by many of the traditional asset finance providers, are now looking for funders to build long term relationship with. Renaissance Asset Finance is well placed to do just this.
“We understand our clients’ individual needs and aspirations in a way that a large company cannot, enabling us to provide knowledgeable financial support to SMEs. While other companies in the market are using centralised systems, we believe in a more personalised, one-to-one client service. We also have the advantage of being unburdened with a legacy portfolio. Fred Yue, Head of Leasing at BLME, added,read more...
STAR makes its move
It’s almost a year ago that Leasing World spotted Tony Mallin, CEO of STAR Capital Partners (“STAR”), a leading fund manager, at the Leaseurope Annual Convention in Rome. At the time we recorded a video interview with him where he said, “I’ve decided to get back into the leasing industry . . .” Well, only ten months later, STAR has announced that it has acquired Kennet Equipment Leasing Limited via STAR Finance Partnership LP (a vehicle established to help consolidate the asset finance broker market). Initial funding allocated for this investment is in excess of £100 million. This represents a natural extension to STAR’s long-standing track record of investing in and arranging financing for asset-based businesses.
Kennet Equipment Leasing Limited (“Kennet”) is one of the leading equipment finance brokers to small and medium-sized enterprises (“SMEs”) in the UK. Kennet has been arranging financing for SMEs for close to 25 years. Since inception, the company has arranged over £500 million in equipment financing for small and medium-sized companies across the UK. The company has a strong reputation for customer service, and has been recognised through various industry awards (see photo receiving LeasingWorld Funders' Choice award). Kennet arranges financing for all business-essential assets throughout many industries. Individual financings range from £250 to £250,000 per transaction. The company will continue to be run by its experienced management team led by Chairman Steve Swift and Managing Director Tim Tainty (pictured at start of article)).
Tony Mallin, CEO of STAR, said, “Asset-backed financing and leasing is probably the most suitable form of financing for small and medium-sized companies. We look forward to working in partnership with Kennet’s management team and employees who have created an excellent business arranging financing for UK SMEs since 1991.”
Steve Swift, Chairman of Kennet, said, “I have built a strong working relationship with STAR over the last few months and I am looking forward to working with their investment team to continue the Kennet success story and serve our existing and new customers.”
Kennet’s last accounts filed at Companies House are abbreviated accounts for financial year ending December, 2012, when the balance sheet showed Net Worth of £3.4 million. Rumours of STAR’s involvement in Kennet have circulated in the industry for some time, while some wondered if Kennet’s recent activity in clearing block discounting charges and debentures was a sign of clearing the decks before the investment.read more...
£25m investment in Henry Howard Finance
Over the past year or so there has been increasing talk of private equity players reconnoitering the asset finance broker market, looking for opportunities to apply their investors’ funds to higher yielding opportunities than the wider markets currently offer. Matchmakers were employed, and came back with a list of the eligible candidates, obviously the bigger the better, and introductory lunches laid on to smooth the way. Since then, some candidates have spurned their suitors, but others have given it a whirl, and now the first of the summer “weddings” has been announced, with strong rumours of more to come.
So, Henry Howard Finance has married up with specialist financial services private equity investor Cabot Square Capital, after they were able to prove themselves good for a £25 million investment as one of Wales’ “Fast Growth 50” companies. In their financial year ending 2013, the 27 staff-strong Henry Howard Finance reported profits after tax of £232,056, and a Net Worth of £1,590,859. Cabot Square believes that the shortage of SME financing from banks in the wake of the credit crisis has created a significant opportunity for Henry Howard, which is already established as a leading asset finance provider, to build on its experience and expertise in providing finance both directly to SMEs, and via vendor programme sales finance. The big difference is that Henry Howard can now write more business using its own capital.
Mark Crook, 50 percent shareholder of Henry Howard Finance along with Howard Ross who owns the other 50 percent, added, “It is great to be working with Cabot Square who have an excellent track record of building highly successful financial services and lending businesses. The new investment will enable us to use our expertise and funding to allow Henry Howard to write much more business in-house, and to develop the range of financing solutions that we are able to offer. The Henry Howard culture is to be responsive and flexible, and that is exactly what SMEs and vendors are crying out for.”
Richard McDougall, Investment Director at Cabot Square Capital, was appointed to the Henry Howard board in July, as was Cabot’s Edward McNeill. McDougall stated, “It has been a turbulent few years in the SME financing marketplace . . .read more...
FLA drinks with Cardsharps
The FLA Summer Drinks were held at the Museum of the Order of St John, located in London’s trendy Clerkenwell district, also known as the home of Cardsharps (not a reference to credit card providers, but to the famous painting by Caravaggio, see below).
The event was sponsored this year by Just Cashflow, which makes cash available up to £100k to UK limited company SMEs. There was a goodly turnout of top people from the industry, excellent food and wine, and as could be expected, the conversation focused on UK leasing, and the upcoming World Cup Final in Brazil. The favourites of course are Germany, though as one who believes that Brazil made Germany look better than they are, and being fans of word-play as well as ball-play, LeasingWorld puts the odds at evens.
The Director General’s speech kicked off promptly at 7pm with good news on the market growth front:
“The industry statistics for May show that the asset finance market has continued to grow – new business was 6 percent higher than in May 2013, and across a pretty wide front. Agricultural and construction plant have done particularly well so far this year, up by 27 percent and 28 percent percent respectively.
We also saw steady growth inread more...
NACFB Commercial Finance Expo
“Fifth year for the show and more exhibitors and visitors than ever.” This statement sums up what a fantastic day the Commercial Finance Industry had on the 25th of June at the NEC. The same morning as the show, the NACFB featured in an article in The Sun newspaper as well as being interviewed by Sky News as it’d announced that its members were now writing £1 billion of business every month.
But what about the show? The Expo had 1500 people at the Event this year with nearly 100 exhibitors in the hall. There was a rally car outside the hall, a double decker bus inside the hall, world cup themes, a stand set up as a bar, and even Eric Bristow throwing darts for the day. This was an event that said the commercial finance broking industry is coming back and lending to businesses across the UK, which tied in nicely with the interest from the national press and media.
There was a real buzz about the show and if you tried to go for a walk between 10am and 3pm you would have noticed that it was quite tricky to move at any speed through the crowds. The quality of the exhibitor stands did not disappoint and it gets higher every year, which is a sign of how seriously people take the Expo opportunities. Expos are a great way for many industries to pull their players together, meet and greet with the people you phone or email all year, and welcome new players.read more...
More huge VAT bills
A PwC press release says: Banks, insurers and other financial services firms across Europe face extra VAT costs running into £100 millions in the UK alone, following an ECJ judgment in September. The ruling means services supplied between a group’s headquarters and its branches may now be subject to VAT. Today’s judgment concerned Skandia America Corporation and the Swedish Tax Authority. Other tax authorities across the EU will now consider how they implement the rules.
Stephen Morse, tax partner at PwC, commented: “The case significantly expands the VAT net for financial services firms. Banks and insurers are likely to be affected most. It’s standard for head office costs to be shared between a group’s subsidiaries. Any internal costs between a firm’s branches will now face VAT, rather than just the external costs.
Many financial services firms will see their VAT bills soar . .read more...
Fireworks at Barcelona Convention?
Commenting on a preview of the three best innovation projects from Leaseurope’s Future Group Programme, Director General, Tanguy van de Werve, said, “It has been a great four meetings this year, again with many first-rate ideas. The Future Group session at the Annual Convention in Barcelona promises to be explosive!”
“We are very encouraged by the numerous messages of support we have received from CEOs across Europe, saying how useful this Leaseurope’s Future Group initiative proves to be. An e-publication presenting all the class of 2014 projects will be released by year-end, in line with Leaseurope’s objective to give back to the industry,” he added.
The Director General had just witnessed leasing’s bright young talents meeting in Brussels to put the final touches on the top shortlisted innovation projects to be aired at the 2014 Annual Convention of the European Leasing Industry in Barcelona, on October 10th.
Leaseurope, together with Invigors EMEA, the specialist international equipment leasing and asset finance consultancy, had specially organised this final “Class of 2014” meeting in Brussels, the last time the class meets before the top three selected projects are presented to the European industry at Leaseurope’s Annual Convention.
While retaining 2013’s overall philosophy and spirit of continued innovation which characterises Leaseurope’s Future Group Programme, the Class of 2014 was tasked with coming up with an innovative idea that would either harness or integrate the potential of a disruptive innovation into the leasing business. The Group presented their individual ideas in early Spring, and the top three projects were selected at the end of June.
The winning projects include . .read more...
Is the Queen off balance sheet?
Her Majesty the Queen is leasing a luxury Agusta Westland helicopter for a year, it has been reported recently. The helicopter will bear the Royal crest and apparently will be used on a trial basis. According to the Daily Express, a spokesman for the Queen said the monarch had secured an annual lease for a helicopter, for a fixed number of hours. It represented good value for money because it will provide an alternative to chartering a number of different helicopters, the spokesman said. While everyone else consider matters such as whether this is Prince William’s birthday present, the hot topic in the leasing community is - according to Julian Rose at www.assetfinancepolicy.co.uk - the appropriate accounting treatment is for the Royal chopper.
In his blog, he wonders if some are debating whether this is really a lease or a service, given the report that it is based on a ‘fixed number of hours’ which seems to suggest it might actually be more of a service arrangement. It’s tricky however to imagine the royals sharing it with some other local families. The Royal crest also gives us a clue that this is indeed a dedicated asset. Besides, if Her Majesty is telling us that this is a lease, and that leasing represents good value, let’s not argue! So to the heart of the issue.read more...
Who wants to be a millionaire?
The broker market has gone through remarkable transformations in the past four years. It has come from being a bog-standard part of the market, swinging in and out of fashion or favour with lessors, to almost the only game in town for some lessors, and a fertile hunting ground for yield hungry private equity houses. The large brokers who have developed their own-book portfolio as well, have had a boost in the past two years from the absence of low rate clearing bank competition and the virtual disappearance of the overdraft. Meanwhile the lessors that fund them have grown in strength and focus from taking up market share left free by ING Lease’s departure.
Today, many of the large broker funders are operating at a new higher level, higher levels of business, higher standards of credit underwriting, and higher standards of professionalism brought on in part by greater exposure to complex regulatory requirements and training from funders. The result has been that these large broker funders are attractive targets for private equity players, and if you are in the fortunate position of owning a stake in a large broker funder, you can at last see an exit for yourself, and the prospect of a very satisfactory payout for all your hard work.
Will these large brokers with private equity backing take business away from the existing broker funders? Carl D’Ammassa, head of Aldermore Asset Finance, isn’t worried, saying, “I’m quite positive about this and taking a mature perspective on recent activities. Firstly, these moves ensure funding gets through to SMEs who may be struggling to obtain finance. What we’ve seen recently is those brokers who have block books and transact outside of the prime/ tier 1 space gain funding via private equity to grow their operations . .read more...
Leaseurope seeks new Asset Finance head
Leaseurope, based in Brussels, is the voice of the leasing and automotive rental industries in Europe and is composed of 44 Member Associations in 32 countries. It is now seeking to recruit a new Head of Asset Finance and Research, reporting directly to the Director General.
This is a challenging position that requires an extremely dedicated and motivated professional who is eager to work on topics and in an industry that are relatively technical in nature. The successful candidate will also be able to distill technical messages, and position them at the right level and within the appropriate political and/or economic context, depending on the audience. Leaseurope is looking for someone who strives for excellence in their work, with excellent hands-on organisational and multi-tasking skills.
This individual must also be able to identify and make links between industry trends and future European legislative initiatives in view of steering the Federation’s research programme. Additionally . .read more...
Brits shy about their figures?
The Leaseurope Top European Leasing Companies ranking provides a yearly update on new leasing volumes and portfolios of the largest leasing firms in Europe. In the latest survey, 79 European leasing companies took part in the 2013 Leaseurope Ranking Survey. Of those, 62 parent and stand-alone companies reported total new leasing volumes of more than €130 billion, which represents 52 percent of all leasing business written in Europe in 2013. The top 20 parent leasing companies accounted for just over 42 percent of the total new volumes in Europe for 2013, and 27 companies reported new volumes of over €1 billion.
The UK, despite being one of the top two markets for leasing new volume in Europe, the other being Germany, remains shy of revealing how much business is attributable to its lessors. Once again, the Brits refuse to bare their figures in public, and the Leaseurope lessor rankings show only Bank of America Leasing at No. 28, and plucky Asset Advantage Group at No. 61.
So, where are the rest? Well of course, many UK lessors are actually subsidiaries of European lessors, the top names like SGEF, DLL, Volkswagen, Deutsche, Siemens, etc. all have UK subsidiaries whose figures would be subsumed in their parents’ consolidated numbers, and that’s a large part of the UK’s market. As for the UK born-and-bred lessors, anecdote has it that UK lessors like to keep their figures secret, if at all possible. Why tell the world you didn’t do as well as expected, or conversely that you’ve had a bumper harvest, it will only attract unwelcome scrutiny or even unkind comment. See the 2013 rankings based on consolidated figures . .read more...
Segment survey a mixed bag
Leaseurope reports that its valuable Index Segment Survey for 2013, produced in association with Invigors EMEA LLP, represents a bit of a mixed bag, with improvements for some asset classes and some indicators between 2012 and 2013, but a deterioration in others. Of the total outstanding portfolio reported, 40 percent is attributed to equipment, 31 percent to real estate, 23 percent to passenger cars and 6 percent to commercial vehicles.
Equipment and passenger cars saw improvements in profitability between 2012 and 2013, while real estate and trucks experienced declines. Despite this annual increase, equipment leasing saw profitability ratios deteriorating over the course of 2013, whereas trucks experienced slight growth towards the end of the year . .read more...