Should Pollen Street go chasing Waterfalls..?

A proposed offer by Waterfall Asset Management for the Pollen Street Secured Lending (PSSL) investment trust has pitted the fund’s board and investment manager against each other, but who is the potential purchaser at the centre of the dispute?

PSSL investment manager Pollen Street Capital (PSC) has been reluctant to divulge due diligence documents to Waterfall and has accused the board, which supports the Waterfall acquisition and has terminated its investment management agreement with PSC, of putting the fund at risk.

But Waterfall is by no means a new player in the peer-to-peer or alternative lending space.

Waterfall is a US-based asset manager that was founded in 2005 by Tom Capasse and Jack Ross.

The names may not be immediately recognisable but they were early leaders in the asset-backed securities (ABS) industry, setting up a dedicated desk at Merril Lynch in the 1980s.

It was at the investment bank that the pair conducted some of the first ABS issuances in the financial sector.

More than three decades on, Waterfall now invests in structured credit and loan products across the globe and manages $8.7bn (£6.67bn) of assets.

That includes assets in the P2P lending sector.

Waterfall invested £100m in loans originated by consumer P2P lending platform Lendable in 2017 and has also backed loans on business finance platform ThinCats.

It is also a major backer of the UK’s largest P2P lender, Funding Circle.

Waterfall committed to invest £1bn in Funding Circle UK loans in 2018, which included involvement in a £250m securitisation.

The asset manager has made a possible cash offer of 900p per PSSL share and must make a decision no later than 5pm on 24 March 2020. Investors and shareholders will hope the board and current investment manager can resolve their differences so there is still some value left whether the purchase goes ahead or not.