CBILS has become a viable investment opportunity for credit funds and specialty lending platforms as they aim to provide generally higher interest rates and government guarantees
Online lender Funding Circle notes that more securitizations of UK government-backed SME loans are being carried out in private, with the platform.
Funding Circle had reportedly finalized a deal with Sixth Street and Barclays last month.
Since the UK’s Coronavirus Business Interruption Loan Scheme (CBILS) was introduced in 2020, it has become a viable investment opportunity for credit funds and various specialty lending platforms. That’s because these opportunities aim to provide generally higher interest rates and government guarantees for as much as 80% of the total loan balance.
The UK has an active market for non-bank lending platforms focused on serving SMEs, particularly in asset-based lending, and some of these non-bank lenders have been getting into the securitization market for funding.
White Oak Global Advisors has been quite an active CBILS lender across various products, and also led the way in securitizing such assets, closing a £150 million deal with Barclays in September of last year.
After this deal was finalized, the scheme had been scheduled to expire by the end of the month, however, it has now been extended since then, as the UK has been trying to exit the lockdown rounds which have negatively impacted the finances of small businesses in certain market segments.
The scheme is now scheduled to end on March 31, 2021, unless another extension is provided.
Funding Circle’s previous CBILS securitization was a bit unusual when compared to various other non-bank lending platforms as it was also selling equity, with Chenavari Investment Managers taking part as a junior noteholder.
It has been using somewhat of a similar format for the most recent deal, which was finalized in January 2021, according to information shared on the UK’s companies registry. Redange is the junior noteholder, while, Barclays will be funding the senior tranche.
Barclays has been quite active in the deals revealed so far. It served as senior noteholder in Funding Circle’s initial deal, White Oak’s deal, and also as a CBILS securitization for Haydock.