Complex scenario, simple solution

BORROWER Developer
LOAN AMOUNT •Circa £1.2m – Acquisition Loan
•Circa £600k – VAT Loan
LOAN TYPE Structured Finance
LOAN TO COST 51% (combined)
• Acquisition of a commercial/light industrial business park for redevelopment
• Loan includes VAT funding
• Multiple amendments of the facility structure to accommodate the
changing security
• Due diligence relaxed on some security in order to reduce costs and
expedite the process

The Structured Finance team were approached by the prospective borrower on 13th December 2018 seeking funding for the acquisition (and VAT liability) of a redevelopment opportunity in Essex. The borrower had exchanged contracts on the purchase of the commercial/light industrial site with the completion date set for the 7th January 2019. Three other lenders had previously expressed an interest in funding the site acquisition for the borrower, negotiations had become protracted and ultimately all parties declined to assist.

Given timescales were already tight and the approach of Christmas would most likely cause further delays over the festive period, James Greenyer from our Structured Finance team arranged to meet the borrower within 24 hours of the initial enquiry being received in order to ascertain the extent of the borrower’s property portfolio.

The borrower had recently completed a residential development of nine houses. Three houses had sold and the other six were under offer but were unlikely to complete in time for the proceeds to be put towards the site acquisition in early January.

Having considered what facility we could structure on the assets available, James’ proposal was for the Bank to take a charge over the six ‘under offer’ houses (with title insurance in place to expedite matters) plus a charge over the site being purchased, albeit without a valuation or due diligence in order to accelerate the process.

With the approach accepted by the borrower, the team commenced work in parallel with the Bank’s solicitors and valuers who were appointed on the 18th December. After receiving further information, credit approval was sanctioned on the 21st December.

Due diligence carried on over the Christmas break with the team on target to enable drawdown of the loan by the 7th of January completion date. However, the borrower decided he wished to delay the completion until later in the month and subsequently agreed with the vendor to push completion back to the 31st January 2019.

This provided us with a more relaxed timescale, but the loan amount required changed several times as some of the six houses under offer exchanged contracts and completed during the month. The team continued to maintain a close dialogue with the borrower and in the event
revised the security package to three remaining houses, plus a charge over the target site and three further unencumbered development sites. Upon completion the client commented:

“I was very happy with the service provided by United Trust Bank as other lenders were also approached to provide the facility, but they all declined to proceed due to the timescales required.”