Downing Wholesale Finance

The Financial Conduct Authority (FCA) has restricted the promotion of some bonds to every day investors from 1 January 2020. 

The new rules apply only to what the FCA term 'speculative illiquid securities' (SIS). This basically means unlisted debentures or preference shares issued by a company that then uses the funds raised to lend to or invest in other companies or to purchase or develop property that is not for its own use.

Downing Wholesale Finance bond is a speculative illiquid security and therefore investment is restricted to High Net Worth, Sophisticated and Professional investors only. 

You can find out more about the FCA ruling here. 

Downing Wholesale Finance currently focuses on providing facilities for property lending and asset financing companies. These lenders may carry out asset financing, bridging lending, invoice discounting, development finance or other forms of lending, but will ultimately have security over assets or an income stream that the DWF loans will be secured against.

DWF has agreed facilities with borrowers totalling up to £30 million (subject to certain conditions), with over £10 million deployed as at 31 May 2022. All lending is supported by security over the underlying assets of the ultimate borrowers, which can be realised if necessary to recover DWF’s loan amount.

• Downing understands and already operates in the property lending market with our residential development activity. 
• By partnering with accomplished specialist lenders typically lending at loan-to-value ratios sub 75% and DWF typically lending 90% or less of that, DWF benefits from a layer of protection.  

• An established market: finance companies have used these methods of finance for over 30 years and for many is their sole source of wholesale funds
• Return: we believe that lending to asset financing lenders provides appropriate returns for the risks involved
• Risk: DWF has a number of methods of redress in the event of default or financial difficulty of any of the parties
• The finance company has a continued interest in the performance of their book
• DWF's debt ranks as senior to the finance company's investment
• For asset finance blocks, multiple underlying agreements provide granularity to the portfolio
• Quarterly external audits reveal any non-performing paper which must be replaced for value, thus topping up DWF's security on a regular basis

• The target finance companies are UK registered companies trading with UK registered companies. They will also be registered with the Financial Conduct Authority.  
• The DWF team look for companies seeking long term relationships.    
• The finance company will have an experienced management team that knows their respective market.   
• They will also have demonstrated resilience by typically trading through at least one recession.  
• The management team must be able to demonstrate a history of managing their portfolio in a compliant and cost-effective manner, keeping the lid on arrears with readily available good quality management information.  

• As with all investments, investing in DWF would have risks that you should be aware of and comfortable with before you invest. 
• Your capital is at risk and returns are not guaranteed. 
• Investing in smaller companies will normally involve greater risk compared to investing in larger, more established companies. 
• The past performance of DWF is not a reliable indicator of its future results. 
• The issuer may not generate enough money to pay the loan interest on the bond. 
• Other parties have equal-ranking security over the assets of DWF, therefore assets available to satisfy the claims of bondholders in the event of a default may be divided and all capital may not be recovered. 
• Some underlying borrowers may not be able to meet their obligations to the finance companies that we lend to. This may impact the financial companies’ ability to service and repay their loan.  
• DWF lends to UK borrowers in the property sector as well as asset finance.  A material downturn in property prices may affect that borrower’s  and their underlying borrowers ability to repay loans.  
• Both macro and micro economic conditions may affect the asset finance market and affect borrower’s and underlying borrowers ability to repay loans. 
• The Financial Services Compensation Scheme (FSCS) for deposits does not apply to Downing Bonds. There may be circumstances in which investors can claim up to £85,000 of compensation where Downing LLP is unable or unlikely to honour legally enforceable obligations against it (e.g. claims for fraud or misrepresentation). However, investors will not be able to claim under the FSCS simply because a bond fails to repay capital or pay interest.   
• For a full list of risks please see here. 

The DWF team is led by Ian Allder. Ian has over 32 years of financial experience and has worked previously at financial providers such as Santander and RBS Lombard. He specialises in asset and receivables finance for a wide range of market sectors. 

The team is also supported by Parik Chandra. Parik heads the Specialist Lending Team, comprising both Property Finance and Wholesale Lending. On the property finance side he is primarily focused on residential development finance, non-speculative commercial development finance and bridging finance, whilst on the wholesale lending side he is focused on providing structured finance facilities to other lenders. Parik has 20 years' financial services experience, predominantly focused on debt and the real estate finance space where he has led over 150 transactions, but has broader experience including leveraged finance, restructuring and private equity placement.

The uncertainty over the lasting economic impact from the effect of Covid-19 on the UK presents a continued risk, particularly for lending businesses. Future lockdowns could affect some sectors more than others and that may affect the ability of the underlying borrowers to repay loans.