ASSETZ Capital will use its provision fund to return money to investors in wind turbine projects faster than the company could otherwise recover the money.
In an email to investors, sent on Friday (27 September), Assetz said that it had decided earlier in the year to return funds to lenders who had invested in a small group of wind turbine loans.
The lender had planned to make recoveries from security provided for those loans, however “slow progress with those recoveries and other factors have meant that we have not addressed this matter as promptly as we would like,” the email said.
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Assetz will accelerate the return of these funds to lenders by drawing some cash from its provision fund, with the money to be “used solely to accelerate the return of funds to the lenders in the relevant wind turbine loans.”
Stuart Law, Assetz Capital’s chief executive, told Peer2Peer Finance News that the provision fund is discretionary and the withdrawal has not reduced the fund’s balances below the total cash balance published as at the end of March 2019.
“[The provision fund] is still expected to grow to some degree gross of any other payouts to investors in the normal course of its operation,” Law said. “It will also benefit from any gross recoveries from security and legal action above those required to complete this lender repayment and those sums are expected to be substantial.”
Investors will be returned their initial capital investment, with “an interest element too,” Law said.
“All current investors in these affected wind turbine loans will benefit,” he confirmed. “Since 2017 we have only provided loans with property security and this nature of wind turbine loan was discontinued some time ago as it did not provide the nature or strength of security that we have become known and trusted for.”
Law added that there are no other problem loans identified in the account and “none expected as they are all operational wind turbines”.
Assetz has previously made use of the provision fund and can draw excess cash above a certain coverage level.
“Historically we have made very few such withdrawals, limiting these primarily to moving back any money that we used to “seed” a new provision fund when it was introduced,” the email from Assetz said.
“Any recoveries and other monies coming in in relation to this group of wind turbine loans will be used to accelerate the return of funds to affected lenders firstly and hence minimise any drawings from the provision fund excess, and if any excess recovery exists, it will be directed back to the provision funds.
“Assetz Capital will not retain these recoveries for its own use.”
Assetz added that it had consulted city regulator the Financial Conduct Authority (FCA) on the decision to dip into the provision fund, which it believes will balance the interests of its wider lender base with providing a good outcome for the investors in those wind turbine loans.
“We believe that adopting this approach allows us to provide a good outcome to those lenders in those wind turbine loans, accelerating the return of their funds, while balancing the broader interests of our wider lender base by maintaining the significant coverage in the provision funds and replenishing them using any excess recoveries as they are realised,” Assetz’ email said.
The company added that it was “pleased to be providing a full reimbursement to the affected lenders whilst continuing to protect all lenders who are invested in provision fund protected investment accounts”.