This is positive news for RateSetter because we have worked closely with the management team and the purchaser to ensure that the business has the support to move forwards, whilst making sure that our strategic focuses of ensuring that our lenders receive all their money back and winding up our wholesale lending are both accomplished. The deal is expected to complete in September 2017 or earlier.
RateSetter previously provided wholesale finance to George Banco, and in May we announced that we had obtained a minority equity share of the business with the intention of changing the wholesale lending arrangement into one where RateSetter investors would lend directly to George Banco borrowers. However, after further examination, we concluded that we would not continue with this strategy as our development resources could be deployed more effectively to source other borrowers.
The planned acquisition means that George Banco’s existing loans of £32m outstanding to RateSetter investors will be repaid in full ahead of schedule when the deal completes.
When these loans repay in full we expect that Provision Fund numbers will change: Expected Future Provision Fund Inflows from George Banco loans will be removed, as will Expected Future Losses from these loans. Because the Expected Future Provision Fund inflows from these loans exceed the Expected Future Losses (that is, we provisioned more than we expected to lose), the effect of this will be a small reduction in the Interest Coverage Ratio and Capital Coverage Ratio. However, the cash value of the Provision Fund will not decrease.
Non-Standard Finance Plc’s press release announcing the acquisition can be found here.