With savings rates historically low and mounting inflationary pressure, investors have to work hard to unearth income generating opportunities without stepping off the edge of the cliff into Looney Tunes, Acme Investments territory.

 

Now, an investment company that lends money to small and medium-sized firms is coming to the LSE’s main market in a £100m flotation and targeting a 6.5% dividend from 2018 once it is fully invested.

RM Secured Direct Lending (RMSDL) specialises in loans to companies with complicated financial needs but good growth prospects that struggle to raise the finance they need from traditional lenders.

The group lends British companies between £2m and £10m for two to ten years; loans are always secured against the companies’ assets and the businesses have to demonstrate that they are robust with strong prospects.

‘a £100m flotation and targeting a 6.5% dividend from 2018 once it is fully invested’

An example is Tyne and Wear based Satcom Global, which provides satellite systems for ships and planes and is looking to grow; RMSDL lent the company £7.9m secured against the firm’s satellite equipment and the contracts it secures with customers at a rate of 10%.

Most of RMSDL’s lending is between 8% and 12% which is acceptable to the borrowers because of the complex nature of their loans, and means that RMSDL can offer an attractive dividend to its investors.

RMSDL is structured as an investment trust, managed by RM Capital, and expects to deliver an annual payment of 4% in 2017, rising to 6.5% the following year with dividends paid quarterly.

The investment company has seven outstanding loans valued at just over £27million, and a pipeline of lending opportunities valued at more than £140million; in order to spread its risk RMSDL will lend across a range of sectors including student accommodation, a boutique hotel chain and a fenestrator.

 

Muckler spoke to Pietro Nicholls, head of origination and sourcing for the RM Secured Direct Lending plc, and Co-founder of RM Capital’s Direct Lending business in 2015.

 

Muckler – Tell me about RM Capital:

 

RM Capital was founded in 2010, has 28 employees and contractors across three offices (Edinburgh, London and Paris).

The group operates across four key areas, Sales & Trading, FX, Capital Markets & Advisory and Direct Lending.

To date the firm have traded on over £50bn of government bonds and corporate debt and have advised on £1.5bn.

 

Have you done this before?

 

Yes. RM has been helping borrowers with their funding requirements since 2013, and in 2015 we raised our first investment vehicle to lend to corporates. The investments have been a great success and continue to generate attractive risk adjusted returns for our investors. The senior team have over 100 years of experience in lending, investment, advisory and risk management.

 

Tell me about the Company:

 

Our new Investment Trust is called RM Secured Direct Lending PLC (RMDL, the “Company”) and will be managed by RM Capital Markets Limited (the “Investment Manager”).

The Company aims to provide finance in a part of the lending market underserved by banks and other non-bank lenders.

Direct loans will be provided to predominately UK based medium-sized corporates which have exceptional management teams, demonstrate good cash flow visibility and are supported by real assets such as plant, property and equipment.

The Company will target a net dividend yield of 6.50%, which is expected to be paid quarterly. We also seek, where possible to provide a degree of interest rate & inflation protection by investing in index-linked, fixed and floating rate investments.

 

Why do you think this will appeal to investors?

 

Both institutional and retail investors are starved of yield, bank deposit rates are close to zero, yields on government bonds are negligible and equity dividend yields have been pushed lower as a by-product of QE.

RM Secured Direct Lending plc aims to offer investors an attractive dividend, but also a degree of capital protection by making investments which are secured, and where possible will receive RPI or CPI linked cash flows.

How are you different from your peers?

 

We are different in many many ways! For a start we originate all our loans in-house. We do not utilise peer-to-peer platforms.

Our loan sizes are larger than peer-to-peer loans, and smaller than large bank loans.

We always require security!

Investors can buy and sell the shares when they choose, as they are listed on the LSE.

 

How is the roadshow going?

 

It’s going well. We have finished the institutional phase, and the intermediaries offer opened Monday (28th Nov). Our advisor N+1 Singer informed us that we have over 25 institutions in the book at the moment which is great. Our target capital raise is £50-100m and the books are due to close on Friday 9th at 1pm, so get those orders in!

 

Where can investors find more information?

 

Our website and the prospectus

https://goo.gl/mGmbsh

https://rm-funds.co.uk/rm-secured-direct-lending-fund/

 

RM is hoping to raise at least £100million on the stock market.

DIY investors wanting to apply for shares have until 1pm on Friday 9th December through leading stockbrokers and online platforms including AJ Bell, Redmayne Bentley, Shareview and Selftrade.





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