- Client: UK National and Resident
- Net Worth: $20 million+
- Shareholding: UK-listed company with a market capitalisation of $50 million+
- Financing Requirement: Circa £3 million
- Terms: 3-year term at 4.00% fixed interest per annum
Enness was approached by an ultra-high-net-worth individual looking to unlock liquidity against a concentrated shareholding in a UK-listed company. The client had a significant personal net worth and held a substantial position in the company, but wanted to access capital without selling the shares and reducing their exposure to the business.
The company operated within the foreign exchange and payments sector, providing services to businesses and financial institutions. The client was closely connected to the company and wanted to retain their ownership position, including the economic benefits associated with the shares. This meant a conventional disposal of the holding was not an attractive option.
Enness explored a single-stock loan as an alternative way of creating liquidity. This type of securities-backed finance can allow a borrower to raise capital against a concentrated listed shareholding without immediately selling the underlying investment.
We secured a non-recourse facility of approximately £3 million, structured over three years at a fixed interest rate of 4.00% per annum. The structure allowed the client to access the required liquidity while retaining their economic interest in the underlying shareholding, including dividends and voting rights as agreed under the facility.
The transaction subsequently demonstrated the importance of understanding the risks associated with concentrated shareholdings. Within a few weeks of the facility being put in place, the company's share price fell by approximately 60% following a change in management. The decline triggered an event of default and a margin call under the terms of the facility.
Because the facility had been structured on a non-recourse basis, the lender's recourse was limited to the pledged collateral in accordance with the agreed terms. The client therefore did not have further personal recourse beyond the collateral securing the loan. This illustrates one of the important structural distinctions between non-recourse securities-backed lending and borrowing where the lender has recourse to a borrower's wider personal assets.
Single-stock lending can provide shareholders with access to liquidity while allowing them to maintain exposure to a concentrated investment. However, the value of listed securities can be highly volatile, and lenders may impose margin requirements or other protections where the value of the underlying collateral changes significantly.
Enness works with specialist lenders to structure securities-backed lending solutions around concentrated listed holdings and complex shareholder circumstances. Where appropriate, these facilities can be structured around the required amount, term, repayment profile and treatment of the underlying securities.
If you hold a significant listed shareholding and are considering unlocking liquidity without immediately selling your position, speak to a Securities-Backed Lending Specialist to discuss your requirements.
Risk Warning:
Securities-backed lending carries significant risks. The value of listed shares can fall substantially, potentially resulting in margin calls, additional collateral requirements or an event of default. If the borrower does not meet the terms of the facility, the lender may be entitled to realise the pledged securities. Non-recourse structures do not eliminate the risk of losing the pledged collateral, and the precise treatment of dividends, voting rights and future appreciation will depend on the terms agreed with the lender.
Disclaimer:
Enness does not give advice on Securities-Backed Lending or investments, and lender introductions are unregulated. This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, security assessment and lender criteria. Terms and availability will vary depending on individual circumstances and the proposed transaction.
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
